Integration Of Sharia Banking And Financial
Technology (Fintech) In The Agricultural Sector In
The Era Of The Covid-19 Pandemic In Indonesia (Co
5population and was the sector with the highest employment rate [40].
History proves that the agricultural sector has a very important role in this country including the highest absorber of labor, contributor to GDP, contributor to foreign exchange (exports), provider of other industrial materials, provider of food and nutrition, as well as various roles.other important.
The issue of employment, The Central Statistics Agency (BPS) stated that the number of working people as of August 2020 was 128.45 million people. Of this figure, most work in the agricultural sector with 38.23 million workers or around 29.76%. Furthermore, most of them work in the trade and manufacturing sectors with a share of 19.23% and 13.61%, respectively, of the total working population. At least work in the gas electricity procurement sector with a percentage of 0.24% [40]. In the midst of the Covid-19 pandemic situation, many sectors experienced a significant decline, but not the agricultural sector. Based on data from the Central Statistics Agency (BPS), the Gross Domestic Product (GDP) of the agricultural sector in the second quarter of 2020 became the highest contributor to national economic growth, which was 16.24% (q to q) and in the third quarter it continued to grow 2.
Figure 1.1. Percentage of Working Population by Occupation Source: BPS, 2020 (data processed)
Furthermore, based on BPS data, the value of agricultural exports in October 2020 experienced positive growth, amounting to USD0.42 billion or growing 1.26% (m to m) compared to the previous month. On a YoY basis, exports from the agricultural sector grew 23.80%.occupies the second position as a contributor to GDP with a percentage of 13.70%
of the total, one level more lower than the manufacturing sector which is in the first place [40]. The data shows that it is actually in the agricultural sector that a lot of labor is absorbed, so special efforts and great attention
are needed from various parties to synergize to make the agricultural sector the first and largest contributor to GDP and a solution to food security in the pandemic era in this country. .
The agricultural sector is indeed the most absorbent of labor and the largest contributor to GDP in this country, but nowadays the sector is less ogled by the educated community, even agricultural graduates themselves are only a few of them who are involved in the field. One of the reasons for the loss of interest among these young scholars is their sense of prestige to enter a field that is synonymous with poverty and rural areas.
Agricultural businesses face a number of constraints and problems, both internal and external. The internal constraints of small and medium agribusiness entrepreneurs, namely: (1) The level of ability and professionalism of HR in the financial sector is low; (2) Limitations and mastery of technology; (3) Weaknesses in the capital structure, limited access to capital sources because it is assumed to be of high risk and low profitability and has no collateral; (4) Less able to expand market opportunities and access; (5) Weaknesses in the field of organization and management. Meanwhile, external constraints include (1) Lack of trust from various parties in the ability of small businesses; (2) less conducive business climate, due to strong competition from big businesses; and (3) Inadequate facilities and infrastructure.
Data from the Financial Services Authority shows that until May 2017 it was only 5.9% of total loans or around Rp. 290.026 trillion channeled by conventional banks to the agricultural sector of the total national credit. Meanwhile, the level of Islamic banking financing is still relatively low. OJK noted that at the end of May 2017, the total financing funds disbursed amounted to 9.408 trillion or around 3.66% of the total financing of 256.832 trillion [39]. This is because the perception of conventional and Islamic banking institutions towards the agricultural industry has a high risk, the inability of farmers to provide collateral or guarantees, uncertain business activities, not competitiveness, limited number and range of banking operations because farmers live in rural areas.
The pattern of loans provided by conventional banks is considered not pro to the agricultural sector and contrary to the condition of the Indonesian people, who are predominantly Muslim and bound by Islamic sharia law, this is because conventional banking uses the ribawi system (a system in which loan repayments (capital) and interest are the point pressure in lending) which must be paid every month by the borrower and the interest is determined at the beginning of the agreement. For this
problem, the role of Islamic banking is highly expected to contribute to the agricultural sector. The principles and concepts of Islamic banking are more appropriate than conventional banking, This is because Islamic banking uses the principle of buying and selling and profit sharing which so far the farmers have been accustomed to the profit sharing system in their agricultural activities such as maro, gaduhan and others. In the sharia system, both banks and farmers must share all risks that occur in the future, both profit and loss (sharing risk). In Islamic banking, credibility and development has also experienced encouraging growth, the Financial Services Authority [39] recorded total assets as of December 2020 of IDR 397,073 billion rupiah, an increase of IDR 46,709 from 2019 of IDR 350,364 billion. This fact certainly reinforces that the concepts, principles and contracts in Islamic banking can be accepted by the Indonesian people and have enormous opportunities for the development of Indonesian Islamic finance.
Access to capital in this millennial era is quite easy, namely with the presence of financial technology companies (fintech). The presence of fintech is often associated with the banking sector. Various groups consider that fintech is a rival and a threat to the banking sector. The reason is that both have almost the same way of working, namely providing payment services and lending and borrowing funds. Actually, banking and fintech have weaknesses and strengths that complement each other and both are very able to collaborate in order to improve the nation's economic progress.
Banking and fintech have similar services, but both have fundamental differences and different concentration of market segments.
The focus of fintech targets is businesses that have the capacity to develop but lack funding and do not meet the requirements for obtaining bank credit. Fintech acts as a bridge for a business to grow and develop.
Fintech generally offers unsecured loans with high interest rates, relatively short loan repayment tenors of around 1-24 months, limited loan amounts, while banks offer loans with relatively lower collateral and interest rates, fairly long loan repayment tenors, and the amount big loan.
These differences will enable banking and fintech to collaborate and synergize for the welfare of the general public. This collaboration model between Islamic banking and fintech includes, among others, if there are Islamic banking customers who will apply for a loan but do not meet the requirements of Islamic banking, Islamic banking will offer fintech loan products that have easier requirements than Islamic banking, and for these services the bank Sharia will receive compensation or profit sharing from the fintech that cooperates with it.
Contrary to asset growth, the above Islamic banking opportunities, and the presence of fintech above, the level of Islamic financial literacy and inclusion in Indonesian society is still relatively low. According to OJK data (2021) at the end of December 2020 from the 2020 National Financial Literacy and Inclusion Survey (SNLIK) results, the overall national Islamic financial literacy and inclusion levels were 8.11% and 11.06%, respectively. If viewed by sector, the literacy rate and inclusion of Islamic banking reached 6.63% and 9.61%, respectively. This means that in fact people have started using Islamic financial products, but not many understand about Islamic financial products themselves, this is because in Islamic banking there are many foreign terms in it such as mudhorobah, musyarokah, qardhul hasan,
The largest Muslim population, the vast agricultural sector and the well-developed Islamic finance sector are the three inseparable components of the Indonesian economy. Efforts to ground the Islamic economy in these three sectors must continue to be encouraged. The government, scholars, religious leaders, practitioners of sharia economics, practitioners of sharia financial institutions, education practitioners and the Muslim community need to work together to provide inclusive sharia economic education to the wider community,