Analysis of Community Perception towards Sharia Banking in North

Sumatra

Onan Marakali Siregar

, Selwendri

Faculty of Social and Political Sciences, University of Sumatera Utara Jl. Dr. Sofyan No. 1

Medan 20155 Indonesia

Keyword: Public perception, shariah banking, north sumatra

Abstract: The banking industry in Indonesia is increasingly crowded with the emergence of banks operating under

sharia principles. Although in general almost all banking products offered by Sharia banking and conventional

commercial banks are relatively the same, in reality they both have different operational principles, especially

in terms of efforts to obtain profits. In addition, the development between Sharia banking is not as expected

given the population of Indonesia, which is predominantly Muslim. Sharia banking are far behind

conventional banks. The aim of the research was to find out the perceptions of the people of North Sumatra

on Islamic banking through surveys in 4 major cities namely Medan, Binjai, Langkat and Deli Serdang which

were considered to represent the Muslim population in North Sumatra. This study used a quantitative

descriptive survey and study . The survey is used to obtain a comprehensive picture of people's perceptions

of Islamic banking in North Sumatra. Quantitative descriptive study, used to explore strategies and

considerations used by Islamic banking to the community.The results of the study show that the three

independent variables have an influence and it can be seen that the service variable is the main variable that

contributes most to its relationship with the results of public perception on the two research objects on

Banking.

1 INTRODUCTION

Banks as financial institutions have an important role

in the country’s development process in collecting

funds from public or third parties in the form of

deposits. Banks also distribute funds from third

parties to people who need funds, for both

consumption and production activities. Furthermore,

banks perform other services related to the payment

of a transaction with a guarantee provided by the

banks which can encourage smooth trading activities

of goods and services. The banking industry is one of

the sectors that support the country's economy. For

example, in terms of accelerating national

development, banks distribute loans, both productive

credit for business capital and investment, and

consumer credit.

The banking industry in Indonesia has become

more crowded with the emergence of banks that

operate with Islamic principles or commonly known

as sharia banks. In general, almost all banking

products offered by sharia banks and conventional

banks are relatively the same. However, both types of

banks have essentially different operational

principles, especially in terms of profit-making

efforts. Conventional banks have operational

principles based on the interest system whereas sharia

banks operate based on the profit-sharing principle

which is in accordance with Islamic law.

The development of sharia banking operational

activities in Indonesia began in 1992 since the

establishment of PT. Bank Muamalat Indonesia Tbk

(PT. BMI) or 4 years after Pakto 88 deregulation. The

development of sharia banking runs slower than

conventional banks. The operations of sharia banking

in Indonesia are based on the Act No. 7 of 1992

concerning Banking which was further amended by

the Act No. 10 of 1998. Consideration of the

amendment to the Act was made to anticipate

challenges in a more advanced and complex financial

system and to prepare infrastructure for the

globalization era.

The emergence of sharia banking in the national

banking system is not solely to accommodate the

interests of the Indonesian people which are mostly

Muslim. It is not a guarantee, but a real antithesis of

Siregar, O. and Salwendri, .

Analysis of Community Perception towards Sharia Banking in North Sumatra.

DOI: 10.5220/0010103718471850

In Proceedings of the International Conference of Science, Technology, Engineering, Environmental and Ramiﬁcation Researches (ICOSTEERR 2018) - Research in Industry 4.0, pages

1847-1850

ISBN: 978-989-758-449-7

1847

the development of sharia banking which apparently

tends to run slower than conventional banks. It is

evident from the growth of the sharia banking total

asset until the end of 2015, which has been operating

for 23 years since the Islamic banking system

emerged in Indonesia. The market share of sharia

banking has only reached 6% of the total national

banking asset which has the ideal growth of 30%.

This is inversely proportional to the situation of

Indonesian society in which the potential market

share of sharia banking in Indonesia is huge. The first

reason is that the percentage of Indonesian Muslim

population is 80% of the total population according to

statistical data (BPS, 2015) which is around 250

million people. In addition, the market share of sharia

banking is not only limited to Indonesian citizens who

are Muslim, but also non-Muslim.

The low market share of sharia banking currently

is a challenge that must be answered and manifested

into concrete actions. The solutions to this problem

must be sought by sharia banking institutions and

institutions that protect them, such as OJK which has

control and supervision authority for banking

institutions under the Ministry of Finance to increase

the growth of sharia banking nationally. Some

questions that should be answered to find the

solutions are whether people perceive that sharia

banking is similar with non-sharia (conventional)

banking although it is clear that bank interest is

forbidden in Islam, whether sharia banking network

is not evenly distributed and only operate in potential

regions which results in socialization of sharia

banking to the community is not optimal, whether

Islamic banking products are not competitive and

seem more expensive than the non-sharia banking

products for financing, especially those provided by

BMT and Sharia BPR, whether sharia banking is

considered as unfamiliar so that its advantages cannot

be felt by people yet, or whether sharia banking

capital is still weak and the information technology

used still need to be improved.

Some of the factors mentioned above influence

the community perceptions in making decisions to

use sharia banking products. In addition, there are

also other factors that might influence people in

accepting the existence of sharia banking.

Therefore, it is interesting to conduct a research

on the Islamic law (sharia) and people’s behavior as

the research element. The key factor in this research

was not because the majority of Indonesian people are

Muslims, but because the sharia banking concept is

based on the principle of welfare and fairness as its

priority which should be easy to accept. In addition,

the internal or service factor of the sharia banking and

the demographic segmentation of the community also

became the background of this research. These

factors were generally the determinants of the

community perceptions towards the existence of

sharia banking.

According to the Head Office of the Financial

Services Authority (FSA) Regional 5 North Sumatra,

Lukdir Gultom, as quoted by Analisa (7th February

2017), the market share of sharia banks in North

Sumatra Province only reached 4.3% compared to

conventional banking. It is still below the national

percentage of 5.3%. As the market share is still

relatively low, the potential for the development of

sharia banking in North Sumatra is promising.

The expansion of the sharia banking network is

market driven which is based on the needs and

willingness of the bank to provide an overview of the

needs and potential for the development of sharia

banks. This potential can be viewed from the

economic resources and activities of a region and

from the patterns of attitudes and preferences of

economic actors towards sharia banks products and

services. Therefore, the community perceptions

towards sharia banking are important to be

investigated and mapped so that the development of

sharia banking in North Sumatra can be optimized.

2 RESEARCH METHODS

This research used survey and quantitative

descriptive study. The survey was used to obtain a

comprehensive description of community perception

towards sharia banking in North Sumatra while the

quantitative descriptive study was used to explore

strategies and considerations applied by sharia

banking to the community.

2.1 Research Subjects

The subjects of this research were people of Medan

City, Binjai City, Langkat Regency, Deli Serdang

Regency. These four regions were selected based on

(1) the development of the sharia banking industry in

urban areas; and (2) urban communities as the users

of both conventional and sharia banks.

2.2 Data Collection Methods

1. Questionnaires distributed to people living in the

five regions.

2. Interviews with the leaders of sharia banks in the

five regions.

ICOSTEERR 2018 - International Conference of Science, Technology, Engineering, Environmental and Ramiﬁcation Researches

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3. Focus Group Discussion (FGD) with sharia

banking managers, Sharia Board, academics,

community leaders, and the community. The

FGD was conducted to obtain more

comprehensive information about the

community perceptions, including people’s

demands for sharia banking and sharia banking

strategies to have a more significant role in the

community, especially in North Sumatra

Province.

2.3 Data Analysis Methods

The data analysis was conducted through descriptive

statistical analysis. The analysis was performed to

map the community perception towards sharia

banking in four regions by distributing

questionnaires.

3 RESEARCH RESULT

Based on the research results and data processing, in

terms of educational level, 51% (51 respondents) of

respondents in Medan City had a diploma or

bachelor’s degree, followed by senior high school

level with 34% (34 respondents) and a master or

doctoral degree with 12% (12 respondents). In Binjai

City, 60% of respondents had senior high school

education (60 respondents), followed by respondents

with a diploma or bachelor’s degree with 31% (31

respondents). Similarly, 77% (77 respondents) of

respondents in Langkat Regency also had senior high

school education, followed by respondents with a

diploma or bachelor’s degree with 16% (16

respondents).

The analysis results between the five research

objects had a similarity and difference. The similarity

was the tendency of the community between the two

objects of research which were dominated by diploma

or bachelor’s degree and senior high school with

varying degrees at each level of education. However,

there was also one difference between the five

research objects, namely the percentage of

respondents who had a master or doctoral degree

between one city and another. The percentage of

respondents who had a master or doctoral degree was

12% in Medan City (12 respondents), 3% in Binjai

City (1 respondent), 1% in Langkat Regency (1

respondent), 1% in Deli Serdang Regency (1

respondent).

On the other hand, the highest percentage of

respondents with junior high school level was in

Langkat Regency with 6% (6 respondents), Binjai

City with 4% (4 respondents), Medan City with 4%

(4 respondents), and Deli Serdang Regency with 3%

(3 respondents). Based on the research results on

these two objects, it could be analyzed that most

people in Medan have received education in the

decent and advanced category. It was because more

than 50% of the total population were identified as

having education in the university. Therefore, it can

be concluded that the better, more decent, and

advanced the education of respondents identified in

this study, the better their perceptions towards sharia

banking would be.

4 CONCLUSION

Based on the findings, it can be concluded that:

1. Based on the results of the three independent

variables, the variable of service was the main

variable that contributed the most in relation to

the community perception on the two research

objects towards sharia banking.

2. The results showed that in the two research

objects, respondents in the middle and suburbs

of Medan City tend to have a diploma or

bachelor’s degree, followed by senior high

school level and master or doctoral degree in

which the influence of values at each level of

education varied in each object. It means that the

background, the quality, and the educational

level of the Medan City residents were

categorized as decent and advanced. In addition,

more than 50% of the total respondents in each

research object were identified as having

education in the university level. The

educational background of the Medan City

residents classified as decent and advanced

becomes an internal factor that influences the

selection of perception in determining the

assessment and attitudes towards sharia

banking.

3. The results showed that the influence of age on

the appraisal of sharia banking between the two

research objects showed a similarity and

difference. The similarity was that the

respondents identified in this study were in the

productive age dominated by the age of 20-29

years and the age of 30-39 years. On the other

hand, the difference was the dominance of the

suburban community with more than 50% of the

total sample had a higher participation at the age

of 20-29 years with 67 respondents (67%) than

the respondents in the city with only 44

respondents (44%). Furthermore, the

Analysis of Community Perception towards Sharia Banking in North Sumatra

1849

participation in the suburban community at the

age of 30-39 years was lower with 17

respondents (17%) than that of the respondents

in the city center with 39 respondents (39%) of

the total respondents identified in this study. In

conclusion, the better the educational

background of a person, the higher the level of

a person’s maturity, and the higher the age

productivity as the factors experienced by a

person will have an impact in influencing the

perception selection and determining the

appraisal towards sharia banking.

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