Promoting Islamic financial ecosystem to improve halal industry performance in Indonesia: a demand and supply analysis
Article publication date: 11 May 2020
Issue publication date: 8 June 2021
The purpose of this study is to identify and explore the role of Islamic financing in supporting development of halal industry in Indonesia.
This research is divided into two studies. The first study uses survey-based quantitative method and the second study uses focus group discussion (FGD) method. Using a purposive and proportional sampling technique in the first study, this research collected 1,985 samples of Islamic financial products of business owners (demand-side) from all parts of Indonesia. The data were analyzed using the partial least square structural equation modeling approach. The authors also conducted FGDs, involving 35 participants from government, financial, social and education institutions (supply-side) as well as business owners (demand-side) in three separated times.
In the first study, it can be identified that literacy on Islamic finance, attitude and awareness strongly affect business owners’ intention to use Islamic financial products. It is also found that subjective norm significantly influences literacy, attitude and awareness. Interestingly, religiosity does not significantly affect attitude toward Islamic financial products. According to the FGD in the second study, this research generates several factors motivating business owners’ preference to choose conventional rather than Islamic financial products, including expensive pricing, less developed technology, bad service quality and the halal status of the products. The reason for insignificant results of religiosity on attitude in the first study is explained in the second study. Most users are utilitarians who mainly perceived the products based on the sought benefits provided by the products.
This research offers the government a road map showing the strategy to build Islamic financial ecosystem in Indonesia. The road map integrates supply-side, which includes government, financial industries, social and education institutions and scientific organizations, and demand-side, which includes business owners or entrepreneur associations.
This research provides a wide range of samples derived from business owners’ respondents of halal industry in all representative islands in Indonesia. Therefore, it gives more holistic and representative findings. In addition, the analysis in this research covers not only the demand-side but also the supply-side perspective. Lastly, this research provides an Islamic financial ecosystem model that integrates all stakeholders to improve halal industry performance as a whole.
This paper is part of the research project on “Promoting Islamic financial ecosystem to improve halal industry performance in Indonesia: a demand and supply analysis” funded by the Otoritas Jasa Keuangan/OJK.
The views expressed in this paper are the authors’ only and do not necessarily reflect those of Otoritas Jasa Keuangan (OJK).
The authors thank Primandanu FA (Analyst), Jelita S. Rofifa and M. Algifari as research assistants in the development of this paper. They also thank the anonymous referee, the editor and the panelists and participants at the OJK Working Paper Seminar in Solo in August 2019 for their valuable comments and suggestions on the earlier version of this paper.
Utomo, S.B., Sekaryuni, R., Widarjono, A., Tohirin, A. and Sudarsono, H. (2021), "Promoting Islamic financial ecosystem to improve halal industry performance in Indonesia: a demand and supply analysis", Journal of Islamic Marketing, Vol. 12 No. 5, pp. 992-1011. https://doi.org/10.1108/JIMA-12-2019-0259
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