Journal Criticism / Research article evaluation

Micro, Small-Financial Financing and Its Implications on the Profitability of Sharia Banks
DeReMa Jurnal Manajemen Vol.13 No. 2, September 2018

The purpose of criticism writing is to determine whether this research is a research that is good or
not based on predetermined criteria. The criteria include research problems, identification of core
theory, identification of research variables (independent variables and dependent variables),
operational definitions of variables, research hypotheses, sampling methods, statistical analysis
used, research results, implications for financial managers, investors, and government.

The article titled “ Micro, Small-Financial Fianncing and Its Implications om The Profitability of Sharia
Banks” was taken from DeReMa Journal of Management Vol.13 No.2, September 2018 175, is a
study conducted by Aminah Nuriyah, Endri and Mukhamad Yasid from the Tazkia Islamic College
(STEI), Bogor. The study was conducted with an initial draft: June 5, 2018; Rfevised: July 26, 2018;
Received: August 3, 2018 an this article was published in the form of an article by DeReMa Journal of
Management.

1. Research Problem

“Micro, Small-Financial Financing and Its Implication on the Profitability of Sharia Banks” article,
from DeReMa Journal of Management Vol.13 No.2, September 2018 175 describes the effects of
third party deposits or funds on MSME financing and the implications of MSMEs Financing towards
the profitability of Sharia Banks.

The main objective in this study was to determine the effect of DPK, CAR, BOPO, FDR, and NPF on
Islamic Commercial Bank MSME financing (BUS) and its implications for the profitability of Sharia
banks. The question in this research is "how much influence does UMKM financing have on the
profitability of Return On Assets (ROA)?"

2. Identification of core theory

Abstracts are briefly obtained as follows, the purpose of this study is to analyze the effect of deposits
of third party funds on MSME financing and also analyze the implications of MSME Finacing on the
profitabilty of Sharia Banking. This is because the development of Micro, Small and Medium
Enterprises (MSMEs) in Indonesia is increasing every year, but this is not followed by SME financing
is Sharia banks, the proportion of which has declined in a few years. Sharia banks are expected to be
even more active in raising funds from third parties with various strategies that can be used. As is
known from the research, if the amount if fundrising is getting bigger, the allocation of funding for
MSMEs is also getting bigger. This study uses a Vector Error Correction Model (VECM) to see the
long-term effects and responses to shock that occur in the variables studies. The results show that is
the short and long term the CAR has negative and significant influences on MSME Financing. TPF,
NPF, BOPO and FDR have a significant positive effect on the financing of MSMEs in the long terms.

In this study there are five initial hypotheses that will be tested for truth. These five hypotheses are
obtained from literature, literature reviews, and journals (the results of previous studies). The details
of how to collect data are explained in this research article.
3. Identification of research variables (independent variables and dependent variables)
In this study there are five variables grouped into two parts, namely the dependent variable
(independent variable) and the independent variable (independent variable).
3.1. CAR variable does not give effect both short and long term to finance MSMEs. In the short
term, only the FDR variable has a significant positive effect, while deposits, NPF, BOPO, and
FDR are significant in the long run towards MSME financing.
3.2. Variable DPK, CAR, NPF gives a significant influence on ROA profitability in the long terms.
While for the short term, only BOPO and NPF have an effect on ROA profitability. MSME
financing is proven to have no effect on ROA profitability.
3.3. Shocks that occur in SME, DPK, NPF, CAR, BOPO, and FDR financing will be stable in the long
terms. Shocks that occur in the CAR are responded negatively by MSME financing, and will
be stable in the long terms. Shocks that occur in profitability ROA, DPK, NPF, CAR, BOPO, and
FDR will be stable in the long run. Shocks that occur in MSMEs are responded negatively by
ROA, and will be stable in the long terms.

4. Operational definitions of variables

The operational definition of a variable is the definition of a variable (which is revealed in concept
definition), operationally, practically, in real terms the scope of the research object / object under
study. Variables used in this research is independent variable and dependent variable.

a. Independent Variable
The independent variable is the variable that affects, which causes the emergence or change
of the dependent variable. The independent variable used in this study are TPF, CAR, NPF,
FDR, BOPO, and ROA
b. Dependent Variable
Dependent variables are variables that are influenced because of the presence of variables
free. The dependent variable used in this study is the financing of MSMEs that financial
sharia.

5. Research hypotheses
H1: Third Party Funds (TPF) have a positive effect on the financing of Sharia MSME
Based on the data analysis shows that the TPF affects the financing of MSMEs in sharia
commercial banks, this research is supported by an existing theory in which the TPF is funds
collected by banks from the second party or the community that will be channeled back to the
community through financing. The results of this study are in line with the research conducted
by Meydianawathi (2007) which states that the TPF has a positive and significant impact on
MSME loans. This is also the same as the results of a study conducted by Purwanto (2016) that
the TPF had a positive and significant impact on the financing of MSMEs.

H2: Operational Cost to Operating Income (BOPO) has a positive effect on the financing of
MSME sharia
Based on the research, it was found that in the short term Operational Costs and Operational
Income (BOPO) did not affect the financing of MSMEs, both high and low BOPO. In the long run,
BOPO is very influential, high BOPO can increase MSME financing in Shari'ah commercial banks
and vice versa, low BOPO can reduce MSME financing in sharia commercial banks. This is in
accordance with the theory that operational costs are costs incurred by banks to carry out their
operational activities to obtain profits which are the main objectives, in line with the
Dendawijaya (2005) stated, the lower the Bank's Operational Costs and Operating Income
(BOPO) on bank income, the more much of the total income of sharia banks is given to the
financing sector. However, it is different from the research conducted by Widiyanti et al., (2014)
which states that Operational Costs have a non-significant effect on lending to MSMEs.

H3: Non Performing Financing (NPF) has a negative effect on the financing of MSME sharia.
The results of this study can be concluded that NPF is influential, the high low NPF can affect the
financing of MSMEs in sharia commercial banks. This research is in accordance with the theory
put forward by Widyaningrum et al., (2015: 971), if the NPF ratio increases, the problematic
financing issued by the SRB increases and causes the losses faced to increase so as to reduce the
rate of profit, decrease in profit can reduce the funds disbursed to customers. This is in line with
the research conducted by Wahab (2014: 130), where NPF has a negative effect and is not
significant in mudharabah financing. Long-term NPF variable shows a positive and significant
value. This research is in line with Rimadhani's research (2011) which states that NPF has a
positive and significant effect on murabahah financing.
The results of this study reveal that if the NPF rises, the financing of MSMEs will also increase.
This can happen because the portion of the financing problem or NPF is the NPF of the total
financing of Islamic banks. So for other products, funding is still being channeled, both for
consumer and MSME.

H4: Financing to Deposit Ratio (FDR) has a positive effect on the financing of sharia MSME
It was concluded that an increase in FDR in the long term could increase MSME financing in
Islamic Commercial Banks, if there was a decrease in FDR, it could reduce MSME financing in
Islamic Commercial Banks.
The hypothesis that FDR has a positive effect on mudharabah financing is acceptable. FDR is the
ratio between the total amount of credit given to the bank and the funds received by the bank.
The higher the FDR means the higher the mudharabah financing channeled by the BPRS.
This research is also in accordance with research (Aal et al., 2013) that the higher the value of
FDR will further increase the financing activities carried out by banks. Aal et al., (2013) stated
that this condition occurs because Islamic banks can maintain the funding needs obtained from
third parties properly, so that the bank has a flow of funds that can be used to conduct financing
activities. This result is also supported by Adzimantinur's (2014) research that the FDR
relationship with financing is consistent with the theory that the higher the FDR shows the
higher the funding channeled from the received third party funds.

H5 : Capital Adequecy Ratio (CAR) has a positive effect on the financing of sharia MSME.
Based on the research it was concluded that CAR did not affect the financing of MSMEs. High
low CAR does not affect the financing of MSMEs in Islamic commercial banks. This research is
different from the theory put forward by Purwanto (2016) the higher the bank CAR, the higher
the level of capital adequacy to channel capital to financing. The results of this study are also not
in line with the research conducted by Meydianawathi (2007) that CAR has an influence on the
financing of MSME loans.
6. Sampling methods

This research is descriptive quantitative research because it involves quantitative calculations and
literature studies. This methodology was chosen because the data in this study requires quantitative
calculations. Descriptive because it explains the effect of information on the TPF, CAR, NPF, BOPO
and FDR of Sharia banks towards MSME financing. Also the influence factors of TPF, CAR, NPF,
BOPO, and FDR as well as UMKM financing towards profitability ROA. Data collection techniques are
recording directly in accordance with the data used. Time Series research from 2011-2016 uses
monthly statistical reports with periods from January to December 2016 issued by Bank Indonesia.
The data used in this study is monthly time series data from 2011-2016. This method can also
analyze the relationship between independent variables namely TPF, CAR, NPF, BOPO and FDR, with
the dependent variable of SME financing and ROA.

7. Statistical analysis used

Statistical analysis used is made in the form of tables, figures and graphics.

8. Research results

The results of this study state that:

8.1. CAR variable does not give effect both short and long term to finance MSMEs. In the short
term, only the FDR variable has a significant positive effect, while deposits, NPF, BOPO, and
FDR are significant in the long run towards MSME financing.
8.2. Variable DPK, CAR, NPF gives a significant influence on ROA profitability in the long term.
While for the short term, only BOPO and NPF have an effect on ROA profitability. MSME
financing is proven to have no effect on ROA profitability.
8.3. Shocks that occur in SME, DPK, NPF, CAR, BOPO, and FDR financing will be stable in the long
term. Shocks that occur in the CAR are responded negatively by MSME financing, and will be
stable in the long term. Shocks that occur in profitability ROA, DPK, NPF, CAR, BOPO, and
FDR will be stable in the long term. Shocks that occur in MSMEs are responded negatively by
ROA, and will be stable in the long term.

9. Implications for financial managers, investors, and government

The banking parties that are sharia banks that provide funds to MSMEs are expected to
cooperate with the government to create a good monetary condition. Sharia bank
intermediary function should be done as it should. Sharia banks are expected to be even more
active in collecting funds from third parties with various strategies that can be used. As has been
known from the above research is that if the amount of fund raising bigger then the allocation
of MSME financing is also getting bigger. Sharia banking practitioners concerned must take
appropriate steps and strategies from both internal and external sides. In order to improve
and maintain stability in the distribution of Islamic finance for MSME sector and the rate of
return. Sharia bank financial performance should be further improved again because good
financial condition will support the allocation of MSME financing.
Based on the results of the evaluation and in this criticism in detail, this article is basically a good
article because it meets various criteria, what is called "good research" or good research. However,
in this article there are also various shortcomings of this study, the above are not clear, especially
regarding the formulation of the problem, the problem is that something that happens is not in
accordance with the wishes and expectations. This article is not clearly illustrated but can be seen
implicitly in the abstract.

This article has provided clear data.

Other readers / researchers can obtain benefits and information from the results of this research /
article because: (1) researchers write articles quite systematically and logically so that the flow of the
research can be understood by the reader. (2) because it uses the validity and reliability test (seen
from the validity and reliability test numbers), it can be concluded that the researcher uses reliable
instruments and can be re-researched (assuming the same terms and conditions). Judging from the
identity of the author, the researcher is a professional whose research results can be accounted for.