Impact of Government Policy on Hajj Funds Transfer on
Conventional Bank and Islamic Bank Third Party Funds in
Indonesia: Difference in Difference Approach
Eko Fajar Cahyono, M. Fariz Fadillah Mardianto, and Tika Widiastuti
Airlangga University, Airlangga Street, Surabaya, Indonesia
Keywords: Government Policy, Hajj Fund Transfer, Third Party Fund, Difference in Difference.
Abstract: This paper aims to examine the impact of government policy that is Regulation of the Minister of Religious
Affairs of Indonesia about Banks Receiving Deposit Fees for Hajj in 2013 which contains about the provisions
of Islamic banks as the recipient bank deposits of pilgrimage. This paper seeks to investigate how the policy
impacts on the performance of third party funds of conventional commercial banks and Islamic commercial
banks. The data used includes the amount of third party funds collected by banks and researched for 8 years
from 2009 to 2016. This paper uses difference in difference statistical method with the year 2013 as the year
of the policy of the transfer of funds. The results showed that there is a significant effect between the policy
of hajj fund transfer from conventional banks to Islamic banks to the amount of third party funds collected by
conventional banks and Islamic banks. Government policies in Hajj funds have an effect on the decline in
third party funds owned by conventional banks and in-and-pilgrim government policies have a significant
effect on third party funds in Islamic banks. The implications of this research are the development of Islamic
banks, especially Third Party Funds, need to be supported by the Government's policy and the strength of the
Law and the implication of knowledge science that provides empirical support on the influence of government
policies on the development of Islamic Bank.
1 INTRODUCTION
The Indonesian government is paying great attention
to the development of Islamic banks because it
believes Islamic banks will encourage the real sector
because it is free from the elements of interest and
unsure of speculation. One of the most important
concerns and support from the government towards
Islamic banks is the policy of hajj bank recipients.
The reason behind the emergence of such a policy is
the huge hajj of Indonesia and in the future, the
potential for the fund will also be predicted to
increase. According to a report from the Kompas
daily quoting Abimanyu, the Indonesian Haj
pilgrimage after audited per year in 2016 reaches Hajj
funding, both the initial deposit, the value of benefits,
and the endowment of the Ummah reached Rp 95.2
trillion. Nevertheless, the large fund is not yet fully
absorbed by Islamic banks in Indonesia it can be seen
on the news website detikfinance report stating that
Haj funds in each conventional banking reached Rp
16 trillion.
The Ministry of Religion sees this situation
and seeks to help Islamic banks absorb these funds
and fulfill the hopes of pilgrims so that haj funds can
be managed by Islamic banks. In 2013 the
Government of Indonesia or the Ministry of Religious
Affairs shall issue Regulations Regarding Banks
Receiving Deposit Haj funds shall be Islamic Banks.
This policy is expected that all pilgrim funds can be
managed by Islamic Bank and able to improve the
performance of Islamic banks. The most influential
implication due to the enactment of this policy is the
third party funds of both types of banks. Third party
funds are funds taken from public funds for the
purpose of financial intermediation. With this policy
it is suspected that third-party funds of conventional
banks will shift to Islamic banks, thereby reinforcing
the role of financial intermediation of Islamic banks.
Behavior of economic actors is influenced by
several factors and among the factors that are
considered important is the government's policy
because of its coercive and binding nature and there
is no other choice for economic actors besides
176
Cahyono, E., Mardianto, M. and Widiastuti, T.
Impact of Government Policy on Hajj Funds Transfer on Conventional Bank and Islamic Bank Third Party Funds in Indonesia: Difference in Difference Approach.
In Proceedings of the 1st International Conference on Islamic Economics, Business, and Philanthropy (ICIEBP 2017) - Transforming Islamic Economy and Societies, pages 176-180
ISBN: 978-989-758-315-5
Copyright © 2018 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved

adhering to it Previous studies that learn about how
important government in economic activity, for
example, The influence of government policy in the
economy is also found by Borisova and Yadaf (2015)
that state-owned companies have a better-informed
opportunity than private-owned firms so that they
have a higher chance of trading activities because the
state-owned enterprises are low risk. Government
policies also contribute to the company's performance
through various instruments such as taxes and
subsidies and monopoly or cartel policies.
Government policy can shape the market structure
and in turn determines the level of corporate
competition and includes the bank (Eaton, 1984). On
the consumer side government policies also impact on
their behavior as described by Hsu, Lee and Wang
(2017) that the willingness to pay consumers for
pollution product products is changing as Taiwanese
environmental policies change.
The government's role in banking activities has
often been investigated, for example, Ahmad and
Hassan (2007) investigating the weakness of
Bangladesh government policies that have not been
optimal in boosting the progress of Islamic banks, ie
the policy in the country still equates to conventional
banks and Islamic banks. Arif (2014) points out the
purpose of his research is to test a spin-off policy
based on the Sharia Banking Law. 21/2008 will have
an impact on third-party funds in the sharia banking
industry in Indonesia. The results show that all
independent variables have an impact on third-party
funds in Indonesia's sharia banking industry. The
implication of this result is that spin-off policies have
a good impact on the growth of third-party funds in
the Indonesian sharia banking industry.
Other experts such as Francis and Osborne
(2012) indicated that the regulation on the adequacy
of capital in the UK affects the amount of capital and
the amount of slow financing in the UK compared
with the number of fast financing in the UK. The
Muslim government's policy of Islamic banking has
also been investigated by Isik and Hasan (2003)
which describes that banking liberalization policy in
Turkey has an impact on the market structure of
Turkish banking industry, before the liberalization,
the banking market in Turkey is oligopoly and
changing into the perfect competition. Whereas in
Indonesia the support of the Indonesian government
was reached through the Indonesian Muslim
Intellectual Association (Ikatan Cendekiawan
Muslim Indonesia) as the initiator of the first Islamic
bank in Indonesia and the Indonesian Council of
Ulama as the legal body of lawyer operationalization
of Islamic banking activities in Indonesia
(Choiruzzad and Nugroho, 2013).
Encouragement and Support for Islamic banks in
Indonesia continue to this day, and the policy of
seizing the attention of the public is the issuance of
the Regulation on Banks Receiving Funds for Hajj
Deposit is Islamic Bank. The purpose of this study is
whether the policy is effective and how far the impact
of the policy on the third party funds of conventional
banks and Islamic banks in Indonesia and tested
whether after the government policy there is a transfer
of haj funds (which is part of third-party funds) from
conventional banks to Islamic banks.
2 METHODS
There are four basic procedures in this paper. First,
collected data from bank financial reports and
literature review. Second, we have analysis based on
descriptive statistics. Third, based on Difference-in-
differences (DiD) analysis. Fourth, comparing the
result from DiD analysis and related literature. DiD
method is a tool to estimate treatment effects
comparing the pre- and post- treatment differences in
the outcome of a treatment and a control group. In this
research pre-treatment is third-party fund (DPK)
panel data, observed from 2011-2013, before
Ministry of Religion gives instruction for moving hajj
fund to Islamic bank. Post-treatment for this research
is DPK panel data, observed from 2014-2016, after
Ministry of Religion gives instruction for moving hajj
fund to Islamic bank. DiD illustrated in Figure 1.
Figure 1: Graphical Illustration for DiD.
If we consider Figure 1, control group is DPK for
conventional bank, and treatment group is DPK for
Impact of Government Policy on Hajj Funds Transfer on Conventional Bank and Islamic Bank Third Party Funds in Indonesia: Difference in
Difference Approach
177

Islamic bank. Before mean period when both
conventional and Islamic bank could receive hajj
fund. After mean period when observation done to
measure how significant implication from Ministry of
Religion that gives instruction for moving hajj fund
to Islamic bank, if we compare with last period
according to DiD concept.
The most important assumption in DiD is the
parallel trends assumption. If there is no convincing
graph that shows the parallel trends in the pre-
treatment outcomes for the treatment and control
groups, it can be cautious. If the parallel trends
assumption holds and we can credibly rule out any
other time-variant changes that may confound the
treatment, then DiD is a trustworthy method. For
determining decision that new regulation, rule, law,
and public statement gives impact in next data, based
on previous data, one-way analysis is using
comparison between p-value and significance level.
An alteration will give impact if mostly p-value less
than significance level. That criterion same with other
experiments design or regression significance test.
When compared with other experiments design
method, DiD more applicable to a wider array of data
than the standard fixed effects models that require
panel data (Bertrand et al., 2002). More literature
about DiD method can be studied in Angrist and
Pischke (2008), and Ryan et al., (2014).
In this research, data was taken from financial
report conventional and 7 appointment Islamic bank.
There are two groups, Islamic bank and conventional
bank. Both of them as subject. Islamic bank includes
of 6 banks in Indonesia such as Islamic bank part of
Mandiri, BRI, BNI, Mega, Panin Bank, and
Muamalat Bank. Conventional bank includes of 5
banks in Indonesia such as Mandiri, BRI, BNI, Mega,
and Panin Bank.
3 RESULT AND DISCUSSION
Figure 2: The Rankings of DPK Average 2011 – 2013.
Figure 2 shows the ranking of DPK average of
Islamic bank in Indonesia from 2011 to 2013. The
highest number is 487.168 and the lowest number is
1504. That number represents the low DPK of Islamic
banks before the government policy to transfer hajj
fund was applied.
Figure 3: The Rankings of DPK Average 2014–2016.
Figure 3 shows the ranking of DPK average of
Islamic bank in Indonesia from 2014 to 2016. The
highest number of DPK in that year is 691.755 and
the lowest number is 5968. It represents the
significant increasing number of DPK in Islamic
banks after the government policy to transfer hajj
fund was applied in 2013. Generally the DPK growth
of banking can be seen in figure 4 below:
Figure 4: The Development of DPK Average for 2011-
2016.
Based on Figure 4, can be interpreted that parallel
trends assumption fulfilled, because trend of DPK for
conventional bank, Islamic bank, and all bank
parallelly have specific trend. The trend is increase.
As a result of the regulation of minister of religious
affairs number 30 year 2013, requires transfer of hajj
savings account from conventional bank to Islamic
bank because conventional bank is prohibited to
accept deposit of hajj cost. So that amount of third
487168
446237
260282
102900
50592
48829
34487
11571
6955
5069
1504
1000 101000 201000 301000 401000
Mandiri
BNI
Mega Bank
Muamalat
Sharia BNI
Sharia Panin
691755
681960
373286
130064
63961
50612
46068
19719
15664
6592
5968
5000 205000 405000 605000
Mandiri
BRI
BNI
Panin Bank
Sharia Mandiri
Mega Bank
Muamalat
Sharia BRI
Sharia BNI
Sharia Mega
Sharia Panin
15000
115000
215000
315000
415000
515000
2011 2012 2013 2014 2015 2016
ICIEBP 2017 - 1st International Conference on Islamic Economics, Business and Philanthropy
178

party fund from Islamic bank change towards
increase in amount. Regulation of the Minister of
Religious Affairs of the Republic of Indonesia
Number 30 Year 2013 concerning on Banks
Receiving Deposit Fees for Hajj Pilgrimage which
contains about the appointment of islamic bank as the
recipient bank of hajj deposit gives significant impact
to third party fund collection in conventional bank
and third party fund collecting in Islamic bank.
Increasing the amount of third party funds collected
by Islamic banks happened after the appointment
policy of Islamic banks as recipient bank of hajj
deposit. The policy applied by the government
requires the clients of conventional bank hajj pilgrims
to transfer the pilgrimage fund to Islamic banks,
resulting in the addition of third party funds of Islamic
banks. Significant impact seen from the comparison
of the number of third-party funds of Islamic banks in
years where the regulation of the minister of religion
of the republic of Indonesia number 30 of 2013 on
banks receiving deposit fees for hajj pilgrimage
before applied and after applied. The running data
though DiD in Islamic and conventional banks can be
seen in tables:
Table 1: DiD Estimation Result for Islamic Bank.
Variable
Differences
(1)
(2)
(3)
DPK
(Third
Party
Funds)
5991,17
(0,074*)
7723
(0,077*)
10632,5
(0,046*)
Constant
22646
(0,035*)
22093
(0,032*)
23528
(0,024*)
Obs.
6
6
6
Subject
6
6
6
State
Effect
Yes
Yes
Yes
Year
Effect
Yes
Yes
Yes
State
Trends
Yes
Yes
Yes
Sig
Yes
Yes
Yes
*) Compared with significance level 0,1 (10%).
Regulation of Minister of Religious Affairs
number 30 of 2013 has decreases the number of bank
choices for customers to make a fee for the
pilgrimage. This regulation of the minister of religion
requires the customer to make a deposit of the cost of
hajj pilgrimage in the Islamic bank. When the
regulation of Minister of Religious Affairs number 30
of 2013 does not exist yet, the fee of hajj can be done
in all banks, both conventional and Islamic banks. But
when the regulation is applied, the bank whose
allowed to receive the Hajj fund only in Islamic
banks. Thus reducing the number of bank choices that
can be chosen by the community.
Table 2: DiD Estimation Result for Conventional Bank.
Variable
Differences
(1)
(2)
(3)
DPK (Third Party
Funds)
122861,8
(0,023*)
110031
(0,095*)
115405
(0,097*)
Constant
264464
(0,027*)
257307
(0,010*)
320245
(0,031*)
Obs.
6
6
6
Subject
5
5
5
State Effect
Yes
Yes
Yes
Year Effect
Yes
Yes
Yes
StateTrends
Yes
Yes
Yes
Sig
Yes
Yes
Yes
*) Compared with significance level 0,1 (10%).
Before the regulation of the Minister of Religion
is applied the number of banks that can receive the
deposit of the cost of hajj pilgrimage amounted to
hundreds of banks, but after that regulation applied, it
reduced into 17 Islamic banks. The number of
Muslims in Indonesia that reaches 85% of the whole
population is the huge supply of Islamic banks for hajj
funds. Changes in market structure caused by the
government change the amount of supply faced by the
market of Islamic banks. In addition, conventional
banks also have to make the transfer of hajj funds to
Islamic banks due to the implementation of the
regulation of Minister of Religion number 30 of 2013.
4 CONCLUSION
The government policy as stipulated in the Regulation
of the Minister of Religion on the Stipulation of the
Recipient Bank Deposit Fee for Hajj, affects the
transfer of hajj funds from conventional to Islamic
banks and the result is the third party funds in
conventional banks declined and third party funds in
Islamic banks is rised. This research proved that the
growth of Islamic banks fund can be happened by
government supports. Suggestion from this research
is the government must focus on regulation and
policy that can increase third party fund in Islamic
bank from hajj funds.
Impact of Government Policy on Hajj Funds Transfer on Conventional Bank and Islamic Bank Third Party Funds in Indonesia: Difference in
Difference Approach
179

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