The findings are significant because MSMEs contribute more than 60 percent of Indonesia’s Gross Domestic Product and employ the vast majority of the national workforce. Access to affordable financing remains one of the most critical factors influencing the growth, sustainability, and competitiveness of small businesses. The study shows that while Islamic Rural Banks have developed accessible services and digital platforms, many MSMEs still do not actively use Islamic financial products.
Why Financial Inclusion Matters
Financial inclusion has become a major global development priority. International organizations such as the World Bank and the G20 regard access to financial services as a key requirement for reducing poverty, narrowing inequality, and promoting sustainable economic growth.
In Indonesia, MSMEs represent the backbone of the economy. However, many small business owners continue to face barriers when seeking financing from formal financial institutions. These barriers include limited financial literacy, administrative requirements, collateral demands, and lack of information about available financial products.
As a result, some business owners rely on informal lenders that often charge higher costs and provide less financial protection.
Islamic Rural Banks, known as Bank Pembiayaan Rakyat Syariah (BPRS), are expected to help address these challenges. Operating under Islamic principles, BPRS institutions offer financing models based on profit-sharing and partnership arrangements rather than interest-based lending. These products are designed to better accommodate the needs of small businesses.
How the Research Was Conducted
The study examined the financial inclusion level of MSMEs in Sidoarjo Regency, East Java, one of Indonesia’s most active economic regions.
Research was conducted between November 2025 and February 2026. Data were collected from 61 MSME owners operating in sectors such as culinary businesses, retail trade, handicrafts, fashion, beverages, and services.
The researcher used a structured questionnaire based on Indonesia’s National Strategy for Financial Literacy and Inclusion framework. Four dimensions of financial inclusion were evaluated:
- Access to Islamic Rural Bank services
- Availability of products and services
- Actual usage of financial products
- Perceived service quality
Responses were analyzed using descriptive statistical methods to determine the overall Financial Inclusion Index for MSMEs in Sidoarjo.
Key Findings
The study found that the overall financial inclusion index of Islamic Rural Banks among MSMEs in Sidoarjo falls within the moderate category.
Access to Services Is Reasonably Good
Most respondents reported moderate access to Islamic Rural Bank services.
Key findings include:
- 75.4% of respondents were classified in the moderate-access category.
- 13.1% reported high access.
- 11.5% experienced low access.
Digital services received the highest ratings among accessibility indicators, suggesting that technology is helping improve connections between banks and MSMEs.
Product Availability Remains Low
One of the most concerning findings involves the limited visibility of Islamic financial products.
The study found:
- Only 13.1% of respondents had ever received a product offer from a BPRS.
- Only 8.2% had participated in product socialization or educational activities.
- Only 4.9% had actually used BPRS financing services.
These numbers indicate that many MSMEs remain unaware of available Islamic financial products or have not been effectively reached by marketing and educational programs.
Usage Levels Are Still Moderate
Although many respondents were familiar with Islamic Rural Banks, actual service utilization remained limited.
The research found:
- 73.8% of MSMEs fell into the moderate usage category.
- 18.0% reported low usage.
- Only 8.2% demonstrated intensive use of BPRS services.
The findings suggest a substantial gap between awareness and adoption.
Service Quality Receives Positive Ratings
Respondents generally viewed BPRS service quality positively.
The average quality score reached 3.58 out of 5, categorized as “fairly good.”
The highest-rated aspect was digital service accessibility, followed by the availability of service agents and the convenience of branch locations.
This indicates that digital transformation initiatives are beginning to deliver benefits for MSMEs, particularly those with limited time and mobility.
A Significant Adoption Gap
One of the most important conclusions from the study is the existence of a clear gap between service availability and actual usage.
Many MSMEs know that Islamic financial services exist, but relatively few proceed to use them. The research suggests that low Islamic financial literacy, limited product knowledge, administrative concerns, and stronger familiarity with conventional or informal financing sources may be contributing factors.
The study also notes that improving financial inclusion is not simply a matter of increasing the number of branches or digital platforms. Financial institutions must also build trust, simplify procedures, provide financial education, and design products that match the operational realities of MSMEs.
Implications for Policymakers and Industry
The findings carry important implications for Indonesia’s financial sector, regulators, and local governments.
For Islamic Rural Banks, the research highlights the need to:
- Expand financial education programs for MSMEs.
- Increase product promotion and outreach activities.
- Simplify financing procedures.
- Develop financing products tailored to micro-enterprises.
- Strengthen digital service channels.
For policymakers and regulators, the study demonstrates that financial inclusion strategies should focus not only on access but also on meaningful and sustained usage.
Improving Islamic financial literacy could help close the gap between product availability and adoption, enabling more MSMEs to access formal financing and grow their businesses.
Researcher Perspective
According to Maulana Malik Abidin of Surabaya State University, the study demonstrates that financial inclusion among MSMEs is influenced not only by the availability of banking infrastructure but also by awareness, literacy, and product relevance.
The research concludes that while Islamic Rural Banks have established a reasonably accessible service network in Sidoarjo, stronger educational efforts and more responsive financial products are necessary to encourage wider adoption among small business owners.
Author Profile
Maulana Malik Abidin
Affiliation: Surabaya State University (Universitas Negeri Surabaya – UNESA), Indonesia
Field of Expertise: Islamic Banking, Financial Inclusion, MSME Development, and Islamic Finance
Source
Article Title: Financial Inclusion Index of Islamic Rural Banks for Micro, Small, and Medium Enterprises (MSMEs) in Sidoarjo Regency
Author: Maulana Malik Abidin
Journal: International Journal of Sustainable Applied Sciences (IJSAS)
Publication Year: 2026
DOI: https://doi.org/10.59890/ijsas.v4i5.453
URL: https://dmimultitechpublisher.my.id/index.php/ijsas
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