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Financing Model For Creatif Industry Based on Shariah Governance
Mutamimah
Dept. of Management, Faculty of Economics, UNISSULA, Semarang, Indonesia [email protected]
Abstract
Creative industries have strategic role in community empowerment. But the creative industry have a weakness to access the capital, because they do not have collateral and financial statements standard. This study aims to improve the financing for creative industries based on syariah governance, that are use 6 indicators: transparency, fairness, accountability, responsibility, independence, and syariah compliance, so the financial performance can be improved and the risk can be reduced. The population in this study are all Troso weaving industry at Jepara which total are 283 companies. With purposive sampling, where the sample are Troso weaving industry at least 2 years and get of financing from Islamic banks with murabahah and mudharabah, so obtain 75 samples. Data collection techniques used:
questionnaires and interviews. Data analysis in this research used a descriptive analysis and Partial Least Square. The results of this research that the Troso weaving industry at Jepara not yet implement of shariah governance principles comprehensively and now implementing two shariah principles are: responsibility and compliance. Transparency, responsibility and shariah compliance had positive and significant impact on financial performance, as well as reducing the risk of financing. But fairness, accountability and independence had not impact on financial performance and risk financing. Financial performance hadn’t impact on the risk of financing.
Keywords: creative industry, mudaraba, shariah governance, financial performance and risk financing
INTRODUCTION
Creative industries have potential to increase employment and reduce poverty. The creative industry is an industry that relies on the creativity, talent and innovation. The development of creative industries has fluctuated from year to year from 2011-2015. The creative industries generally have some constraints such as: access to financing, have limited ability to prepare financial statements and the limited training of employees in financial management (Ardan Adicandra, 2016). Likewise, the Ministry of Tourism and Creative Economy identified several problems related to the development of creative economy, among others: lack of access to financing, mainly due to the lack of due-financing scheme with the characteristics of the creative industries are generally not bankable, high risk, cash flow fluctuating, and intangible assets.
According to the outlook of Islamic finance (2015), that Islamic bank financing for investment only 19 percent, while the national banking system is able to achieve for investment are 25 percent. This is compounded by the Islamic bank financing murabahah financing which is dominated by not mudharabah and musyarakah. Murabahah financing have the largest portion is for consumption activities, which amounted are 41 percent.
Besides working capital financing in Islamic banks by 40 percent and the figure is smaller
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than the national banking system reached 47 percent. These results can be concluded that the financing of Islamic banks have not fully lead to the empowerment of the real sector, such as the creative industries. According to research conducted Aryani (2016) it was due to Islamic banks to minimize the profit and loss sharing financing, because it are have high risk, such as irregularities in managing capital for loss sharing. Thus Islamic banking as shohibul maal will be careful in selecting targets mudharib, so the risk can be minimized.
Therefore, in order that the creative industry is trusted by the Islamic banking in obtaining capital, the creative industries should implement shariah governance. Shariah governance serves to anticipate various risks, both financial risk and reputation risk ( Faozan, 2014). Shariah governance is a system of corporate governance that organize, manage and supervise the process control efforts to reduce irregularities in the management of funds of Islamic banking as Shohibul maal. Some Islamic principles of governance include:
transparency, fairness, accountability, responsibility, independence, and sharia compliance.
Expected if the creative industries want to get financing from Islamic banks, must seriously implement sharia governance. Therefore, it encourages researchers to investigate how to develop a financing model for creative industry based on syariah governance.
LITERATURE REVIEW
Creative Industry in Indonesia
Creative industries in Indonesia can contribute to the economic empowerment and reduce unemployment. According to the Ministry of Trade of Indonesia stated that the creative industry is an industry that is derived from the utilization of creativity, skill and talent of individuals to create wealth and employment by producing and developing the creative ability and creative power of the individual. There are 14 sub-sectors of the creative industry in Indonesia, namely: advertising; architecture; art market; craft; design; fashion;
video, film and photography; interactive games; music; performing Arts; publishing and printing; computer services and software; television and radio; and research and development. But in its development is very stagnant, because according to the World Bank survey generally face three major difficulties in running its business, namely: access to financing, limited market access, and low skills of human resources.
Mudharabah For Creative Industry
According to the Ministry of Tourism and Creative Economy, that the creative industry has several characteristics: unbankable, high risk, volatile cash flow, as well as intangible assets. With these characteristics, would be very burdensome creative industries if the borrowed funds into conventional banking based on interest rates and there should be a collateral. Therefore the proper financing of the creative industries is murabaha financing based on profit loss sharing. Mudharabah financing (Ichwan Kurnia, 2013) is a financing in the form of capital / funds provided by creditors or sahibul maal by 100% to businesses to be managed by the creative industries with profit-loss sharing scheme. However, financing is based skim profit-loss sharing laden with risk capital usage and reporting irregularities. This is reasonable because of the existence of asymmetric information between the Islamic bank with the creative industries as mudharib. Therefore, in order to finance this benefit all parties and no one pihakpun aggrieved, it is necessary to syariah governance for the creative industry. The weakness is caused by the financing of the mudaraba contract is very difficult to develop. This can be shown by the data of Statistics Islamic Banking in 2013 where the composition of the portfolio of financing amounted to only 12.71% of total Islamic bank financing. whereas the dominant financing murabaha financing with an average composition
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of the distribution of 59.08% of the total financing. Friyanto (2013) that in the implementation of financing Islamic bank, the bank was concerned about the seriousness mudharib in running the business well, negligence mudharib in running the business is financed by a bank that could have an effect on the magnitude of the result, the risk of side stream, and Islamic banks as owner capital is still not convinced by the customer honesty in reporting the results of his efforts Noraina Mazuin Sapuana (2016) mudarabah as profit- sharing contract is less preferred compare to debt financing instruments because of the asymmetric information problems that exist continuously in this mode of financing. The asymmetric information on profit sharing contract, especially on the asset side, normally occurred as an mudarib who manage the mudaraba fund have full control of the project and have more information regarding the project and its profitability.
Shariah Governance of Creative Industries
In most businesses, the existence of asymmetric information always appears between the creative industries as an agent with the banks as the principal, thus encouraging the emergence of moral hazard that harm others. In the contract for financing on the basis of the results, are particularly vulnerable to irregularities, especially in the form of financial reporting as a basis for the determination of the results. To reduce moral hazard is necessary to syariah governance. Shariah governance is the system, structure and rules to control the behavior of companies as mudharib manage funds borrowed from Islamic banks. Islamic principles of governance, among other things: transparency, accountability, fairness, responsibility, independence, and syariah governance.
Effect of Transparency to Financial Performance
Transparanci is one of the Islamic principles of governance that guarantees access or the freedom for everyone to obtain information about the accountability of businesses.
Through transparency means that the creative industry should provide adequate information, accurate and timely, so that each party can monitor the activity of the company well. Further consequence is to prevent fraud and manipulation that only benefits one particular group alone. Similarly, if the business organization applying principles of transparency it will increase the confidence of stakeholders of creative industries, so that the company's financial performance ride. This is consistent with research Rahmatika, et al. (2015) that the principles of transparency effect on financial performance. Angkasa Pura II (Persero). Dewi and Daughter (2014) which states the principle of transparency effect on financial performance.
H1: Transparency positive effect on the financial performance Effect of Accountability on Financial Performance
Accountability is one of the Islamic principles of governance which is the clarity of the functions, structure, system and accountability elements of the company. When this principle is applied effectively by the creative industries as a fund manager, it will be able to increase the confidence of Islamic banking as Shohibul maal. According to Widodo (2011) in Martha (2014) accountability is a fundamental requirement to prevent the misuse of delegated authority and guarantee authority directed at the achievements of national goals that are widely accepted by the level of efficiency, effectiveness and honesty. According to research Rambe (2013) accountability positive and significant effect on performance. This is consistent with research Rahmatika, et al, Rachmawati Gatot Imam Nugroho (2015) which states that there is a significant positive effect on the performance of financial accountability.
H2: Accountability positive effect on the financial performance
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Influence of Responsibility on Financial Performance
Forms liability company is a company's compliance with applicable regulations, including; tax issues, industrial relations, health and safety, environmental protection, maintaining a conducive business environment with the community and so on. By applying this principle, it is expected that the company will realize in its operations, the company also has a role to be responsible to Islamic bank as well as to other stakeholders. Responsibility is a form of management responsibility to the stakeholders of creative industries. Holy (2013) Responsibility (Holy, 2013) said that responsibility influence on company performance. This is consistent with research Rahmatika, et al., (2015), shows that the principle of responsibility significant positive effect on the financial performance and regulatory compliance in its responsibility, then the company's financial performance will increase.
H3: Responsibility positive effect on the financial performance Effect of Fairness on Financial Performance
Fairness is equality in fulfilling the rights of stakeholders arising under treaties and legislation in force. Rahmatika et al. (2015) found that the reasonableness of significant positive effect on financial performance. Creative industries as a business venture should be attention to the rights of stakeholders based on the principles of fairness and equality in order to improve the company's financial performance in order to run effectively and efficiently.
H4: Fairness positive effect on the financial performance Effect of Independence on Financial Performance
Indepedency is a state where a professionally managed company with no conflicts of interest and influence or pressure from any party that does not comply with the legislation in force. The freedom to manage the company without a conflict of interest from other parties is important to note in an effort to improve performance and ensure that the company has to be objectively. Gatot Rachmawati research results Imam Nugroho (2015) showed that the independence have positive effect on financial performance.
H5: Indepedency positive effect on the financial performance Effect of Shariah Compliance on Financial Performance
Shariah compliance is adherence creative industries against the Islamic principles of governance, which means in any business activities, creative industries always follow the Islamic principles, especially regarding their procedures based on Islamic value:, there is no usury, gharar and gambling in all transactions, as well as running a business based on the benefit of halal. The better the implementation of sharia compliance within the creative industry business practices, then it will make Islamic banks increasingly confident and steady that the transactions being conducted in accordance with Islamic Shari'a. The existence of sharia compliance would create a trust bank to increase the creative industries. Wardayati (2011) conducted a study with the result that the Sharia compliance is an indicator of influence in the implementation of syariah governance. Furthermore, shariah compliance will be able to improve financial performance.
H6: Shariah compliance positive effect on the financial performance Effect of Financial Performance to non performing financing
If the financial performance of the creative industries nice it will encourage the creative industries to repay the loan on time, so that the financing risk can be reduced. However, in this study the financial performance has no effect on the risk financing. This means that the high financial performance obtained can not push the creative industries to pay off capital funding on time. The high financial performance will decrease non performing financing.
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H7: Financial performance has a negative impact on non performing financing
RESEARCH METHOD
The population in this study are all creative industries Troso weaving Jepara as many as 283 companies. Sampling using purposive sampling based on certain criteria, namely creative industries Troso weaving that has been operating at least 5 years and get a mudharabah financing from Islamic banks. With these criteria obtained 75 Troso weaving creative industries. Primary data were collected using a questionnaire and interviews. The questionnaire addressed to the principal / owner of the weaving industry Troso Jepara district that includes: business profiles, transparency, akuntability, fairness, responsibility, independence, and syariah compliance, financial performance and non performing financing.
Methods of data analysis in this study using multiple regression.
RESULT AND DISCUSSION Descriptive Statistics
Research results in table 1 show that the statistical mean for the Islamic principles of governance, namely transparency, accountability, Responsibility, fairness, independence, and sharia governance is not all worth over 4, it means that the creative industries of weaving Troso yet fully run Islamic principles of governance with well, and the new implementing syariah principle of responsibility and compliance. That phenomenon illustrates that not all creative industries weaving Troso have good skills in business management, is still traditional, less financial reporting, less information technology, as well as the organizational structure is not sufficiently available.
Table 1 Descriptive Statistics
N Range Minimum Maximum Sum Mean
Std.
Deviation Variance Statistic Statistic Statistic Statistic Statistic Statistic Std. Error Statistic Statistic
Transparancy 75 1.80 3.20 5.00 316.60 3.2213 .04705 .40746 .166
Accountability 75 1.20 3.80 5.00 336.00 3.4800 .04329 .37489 .141
Responsibility 75 1.40 3.60 5.00 335.20 4.4693 .05281 .45736 .209
Fairness 75 2.00 3.00 5.00 324.80 3.3307 .05335 .46207 .214
Independent 75 1.60 3.40 5.00 330.20 3.4027 .05308 .45972 .211
Syariah
Compliance 75 2.20 2.80 5.00 321.00 4.2800 .05528 .47874 .229
Financial
Performance 75 1.60 3.40 5.00 326.00 4.3467 .05959 .51605 .266
NPF 75 3.00 1.00 4.00 192.60 2.5680 .08170 .70752 .501
Valid N
(listwise) 75
Validity Test
Test the validity of a program Smart PLS done using size convergent validity of each indicator average of> 0.5 where for values of 0.5 at the beginning of the study had a high value. Based on the validity of the test results that have been done, it is known that all the indicator variable has a value estimate original sample of more than 0.5 and the value of T statistic is greater than T Table (1.67) which means that all indicators valid.
6 Reliability Test
Results composite reliability between the constructs with the indicators can be seen in the following table 2:
Table 2
Composite Reliability Value
Composite Reliability
Transparency 0.853
Accountability 0.770
Responsibility 0.933
Fairness 0.923
Independence 0.911
Syariah Compliance 0.923
Financial
Performance 0.917
Non Performing Financing
0.745
Table 2 shows that the reliability of composite outcome of each variable that is already well above 0.7. This means that all variables have value good reliability and can be used for further analysis.
Table 3 Regression Result
original sample
estimate
mean of subsamples
Standard deviation
T- Statistic Transparancy (X1) -> Financial Performance
(Y1) 0.104 0.119 0.105 0.985
Accountability (X2) -> Financial Performance
(Y1) 0.096 0.082 0.085 1.124
Responsibility (X3) -> Financial Performance
(Y1) 0.419 0.389 0.170 2.470
Fairness (X4) -> Financial Performance (Y1) 0.018 0.021 0.098 0.182
Independency (X5) -> Financial Performance
(Y1) 0.110 0.133 0.222 0.495
Syariah Compliance (X6) -> Financial
Performance (Y1) 0.291 0.290 0.111 2.618
Transparancy (X1) -> Non Performing
Financing (Y2) 0.206 0.263 0.338 0.609
Accountability (X2) -> NPF (Y2) 0.291 -0.077 0.379 0.770
Responsibility (X3) -> NPF (Y2) -0.438 -0.430 0.602 0.728
Fairness (X4) -> NPF (Y2) -0.448 -0.203 0.461 0.973
Independency (X5) -> NPF (Y2) 1.202 0.541 1.129 1.065
Syariah Compliance (X6) -> NPF (Y2) -0.344 -0.185 0.475 0.724
Financial Performance (Y1) -> NPF(Y2) -0.488 -0.076 0.565 0.863
The results showed that the First, transparency as principles of Islamic governance has no effect on the financial performance of the creative industries. This means that the creative industries of weaving troso not provide access to adequate and accurate information for Islamic banks and other stakeholders as a form of business. They are still reluctant to convey information quickly, so it is not able to improve financial performance. This is due to
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the skills possessed by most of the creative industries of weaving troso still low and its infrastructure such as information sisitem still minimal, so the ability to convey information to the bank and other stakeholders is still limited. Based on Bank Indonesia survey in 2014 stated that the craft industry has a low ability to make financial statements such as cash flow and balance of profit and loss, lack of educational background support which is owned by preparers of financial statements, and the lack of training provided to employees in relation to aspects of financial management. Further result is the Islamic banks have not fully believe in the creative industries. Report prepared for the Department of Business, Innovation and Skills (BIS) and the Department of Culture, Media and Sport (2011) that Quantitative evidence from the 2010 Small Business Survey (SBS) shows that creative businesses (CIBs) are no more Likely to apply for finance than other SMEs, but that they are more Likely than average to experience problems getting finance (58 per cent of employers that applied had any problems, Compared to 51 per cent of SME employers Generally). This is contrary to research Rahmatika, et al. (2015) that the principles of transparency effect on financial performance. Angkasa Pura II (Persero). Dewi and Daughter (2014) which states the principle of transparency effect on financial performance.
Second, the results showed that accountability does not have an influence on the financial performance of the creative industries. According to Widodo (2011) in Martha (2014) accountability is a fundamental requirement to prevent the misuse of delegated authority and guarantee authority directed at the accomplishments of the goal. The results of this study contrast with research Rambe (2013) accountability significant effect on performance. Gatot Rachmawati Imam Nugroho (2015) showed that accountability significant effect on the company's performance.
Third, the results show that responsibility has a positive and significant impact on financial performance. The results show that the creative industries Weaving Troso already comply with applicable regulations, including; tax issues, industrial relations, health and safety, environmental protection, waste, maintaining a conducive business environment together with surrounding communities that would affect the financial performance of the creative industries Weaving Troso. The results of this study are consistent with the results of the study of the Holy (2013) and Rahmantika, et al (2015) that the responsibility is a positive effect on company performance.
Fourth, the results showed that fairness has no effect on the financial performance of the creative industries Troso weaving. That is the behavior of the creative industry in meeting the rights of stakeholders both employees, suppliers, managers and consumers were not able to improve the financial performance of the creative industries Troso weaving. These findings are not consistent with the results Rahmatika et al. (2015) who found that fairness significant positive effect on financial performance.
Fifth, the results showed that the creative industries have not been managing its business in a professional, objective and there is always a conflict of interest and pressure from other parties that are not in accordance with the legislation in force. There is no freedom to manage the company without any conflict of interest from other parties is important to note in an effort to improve performance and ensure that the company has to be objectively. The results of this study contradict with result from Rachmawati Gatot Imam Nugroho (2015) showed that the independence of significant positive effect on financial performance.
Sixth, haasil research shows that shariah compliance has a positive and significant impact on the financial performance of creative industries. This means that the creative industry compliance weaving Troso against Islamic principles, including: no usury, gharar and gambling in all transactions, run a business based on the benefits it can increase the halal financial performance (Faozan, 2014). The better the implementation of shariah compliance within the creative industry business practices, then it will make Islamic banks increasingly
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trust and believe that the transaction is conducted in accordance with Islamic Shari'a.
Wardayati (2011) conducted a study with the result that the Sharia compliance can improve financial performance.
Seventh, the results showed that financial performance does not affect the creative industries Non Performing Financing. This means that the financial performance of the creative industries of weaving Troso meningkatpun not affect the creative industries to repay the loan on time, so that the financing risk can be reduced. The high financial performance does not guarantee that the financing risk will drop. Financial Risk The results of the World Bank survey showed that there are three main things related to financial risk faced by business operators crafts, namely: the mismatch in cash flow, the inability to manage business finances, and delays or reluctance on the part of consumers to pay for products ordered for a variety of reasons. The problem that often occurs in the case of payment from consumers including reduction / low quality products which lead the product is rejected, and the lack of a system of Quality Control (QC) as well as production techniques that lead to errors / defects in the product received by consumers.
Determination Test
Based on the determination test, the results showed that R-square for the financial performance for 0875 means that the contribution of syariah governance which include transparency, accountabilitu, responsibility, fairness, independence, and Sharia compliance of 87.5% while the rest is explained by other variables outside the model. Similarly to the value of R2 square for financing risk at 0.187. This means that the contribution of syariah governance which include transparency, accountabilitu, responsibility, fairness, independence, sharia compliance and financial performance amounted to 18.7%, while the rest is explained by other variables outside the model.
COCLUSSION AND RECOMMENDATION
The results of this study indicated that the Tenun Troso creative industry has not fully implementated the syariah governance well, and now implementing principle of responsibility and syariah compliance. That phenomenon illustrates that not all Tenun Troso creative industries have good skills in business management, has not been adequately prepare financial statements, information technology is limited, as well as the organizational structure is not structured well. Shariah governance if implemented properly it will be able to improve financial performance and reduce the non performing financing. Responsibility and shariah compliance has a positive and significant impact on financial performance, and reduce non performing financing. However, transparency, fairness, accountability and independence have no effect on financial performance and non performing financing. Financial performance has no effect on non performing financing.
Recommendations in this research are: a). Tenun Troso creative industries should increase the quality and quantity of human resources, so they can to manage the business profesionally, they can prepare financial statements well, and they have organizational structure properly. So tenun Troso creative industries can be trusted by the Islamic banks or other stakeholder in providing capital, either mudarabah and musyarakah with profit-sharing scheme. b). Tenun Troso creative industries should increase the use of information systems, so they can to convey information quickly and precisely to the banking sector and other stakeholders. c). Islamic banking should provide adequate socialization and education about the products and service to creative industries, so that they can manage the financing from the Islamic banking well, so that the risk can be minimized.
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