Indonesia is probably the country with the greatest diversity of both conventional and Islamic microfinance

Indonesia is probably the country with the greatest diversity of both conventional and Islamic microfinance, the former evolving over a period of over one hundred years, preceded by a history of informal finance of unknown differentiated microfinance infrastructures in the developing world, comprising some 6,000 formal and 48,000 semiformal registered microfinance unit serving about 45 million depositors and 32 million borrowers, 800,000 channelling groups, and millions of informal financial institutions and self help groups. There is hardly an institutional type of microfinance that is not found in Indonesia. One of microfinance institutions in Indonesia is Sharia Rural Banks (BPR Sharia). The establishment of an Sharia Rural Banks in Indonesia can not be separated from the Rural Banks in general. BPRs whose legal status is authorized through the Monetary and Banking Financial Policy Package (PAKTO dated October 27, 1998 is essentially a modification (new model) of Lumbung Desa and Bank Desa existing since the 1980s. While, BPR Sharia was first established on October 8, 1990 in Indonesia after obtaining the principal license from the Minister of Finance of the Republic of Indonesia and started operating on August 19, 1991. The first Sharia BPR was PT. BPR Dana Mardhatillah, kec. Margahayu, Bandung, PT. BPR Berkah Amal Sejahtera, Bandung and PT. BPR Amanah Rabbaniyah, Bandung. In addition, the background of the establishment of BPR Sharia is an active step in the framework of Indonesias economic restructuring as outlined in various financial policy, monetary and banking packages in generally. The establishment of Sharia Rural Banks in Indonesia is not only based on the demands of Islamic friendship which is a strong desire of most Muslims in Indonesia, as well as an active step in order to fill the opportunity against the policy that frees the bank in determining the interest rate (rate interest), which then known as interest-free banks in particular. Act No. 10 of 1998 which amends Law Number 7 of 1992 concerning Banking seems clearer and firmly recognizing the status of Sharia banking, as mentioned in article 13, Rural Bank Enterprises. Article 13 letter C reads as follows Provides financing and placement of funds under the principle of Sharia, in accordance with the provisions stipulated by BI. The existence of Sharia Rural Banks is specifically spelled out in the form of Decree of the Board of Directors of BI. 32/34 / Kep / Dir, dated May 12, 1999 concerning Commercial Banks based on the Sharia Principles and Decree of the Board of Directors of BI. 32/36 / Kep / Dir, dated May 12, 1999 and Circular Letter No. BI. 32/4 / KPPB dated May 12, 1999 on the Peoples Credit Bank Based on the Sharia Principles. Generally, the purpose of the establishment of Sharia Rural Banks as follows 1). Improving the economic welfare of the Islamic ummah, especially the weak economic class society in general in rural areas, 2). Increase employment, especially at the sub-district level so as to reduce the flow of urbanization and 3). To foster the spirit of ukhuwah islamiyyah through economic activities in order to increase per capita income towards adequate quality of life. In addition to the above three goals, Rodoni and Hamid (2008) add some things that become some desirable objectives of establishing Sharia BPRs in the economy, which are as follows To accelerate the rotation of economic activity because the real sector will get funding Increase income per capita. Geared to meet the needs of banking services for rural communities. Support the growth and modernization of the rural economy. Serving capital needs with easy and simple crediting procedures. Accommodate and collect public savings. Thus, BPRS can participate in mobilizing capital for development purposes and also to educate the people in saving and saving by providing a close, safe and easy place to save money for small savers. This objective was made because the situation of Indonesia SPECIALLY Bandung related to the condition of banking which is closely related to the condition of society, the relationship of micro enterprises perpetrators to the banking in the form of access that can be seen in the following figure From the objective as mention before, it is known that BPRS has a role in empowering peoples economy by developing weak economic group by developing Micro, Small and Medium Enterprises. This is reinforced with data from sharia banking (2016), BPRS focuses to serve the Micro and Small Business sector (MSE) that distinguishes with Commercial Banks / Sharia Commercial Banks that focus on medium and large scale financing. As shown in Figure 1.1, it appears that the financing disbursed by the BPRS for small and medium enterprises is greater than that distributed to sectors other than small and medium enterprises. Unlike the Sharia Commercial Bank and Sharia Business Unit, the amount of financing is larger for sectors other than small and medium enterprises. BPRS becomes an alternative to conventional financial institutions, especially on a small scale in developing the economic sector in the financing of MSMEs. Based on statistical data of Sharia banking (SPS) per December 2015, the distribution of BPRS financing to MSMEs reached Rp.3.377 trillion. This number is always increasing every year. In the next period per December 2017, the distribution of BPRS financing to MSMEs reached Rp.7.00 trillion. The above conditions are supported by several studies explaining the role of microfinance institutions in supporting the development of micro enterprises. As the research conducted by Antonio (2011) proved that BMTs have an opportunity to cover the SMEs business financing service. Wang (2013) shown that microfinance plays a crucial rule in the revenue and profit growth of SMEs. Momba (2013) in research stated that MFIs has positive impact on SMEs growth in the study area, since the variable amount of loan to the client presenting microfinance accessibility to SME has positive relation with volume of gross sales in Tsh per annum. Also some previous researches are more focused in Islamic microfinance such as Hamzah and Gazali (2015) stated that both industries (Islamic financing and Islamic Micro Enterprise) are in significant relationship as having the same objective which is to perform as accordance with Maqasid AlShariah, Faisol (2017) stated that the Islamic bank financing has significant influence with a positive direction on the SMEss performances. This means that when the Islamic bank financing improved, will improve the SMEss performance. Further Islamic bank financing has a significant effect with positive direction towards the SMEss Welfare. Purnamasari and Darmawan (2017) stated that the interaction between SMEs and Islamic banking is quite close relatively but need to be upgraded. The study only gives general overview and description about positive impact from Islamic banking mechanism to stimulate SMEs in Indonesia. Yussuf (2017) stated that that Islamic banking helps SMEs to grow financially which enhances their financial performance. The study also concludes that Islamic banking affects the growth of SMEs. Meanwhile Suharto and Fasa (2017) explains how the Problems and Challenges of MSMEs in Indonesia Development of MSMEs in Indonesia Relationship Between Islamic Bank and MSMEs in Indonesia The Role of Islamic Bank for Development MSMEs and The Challenges of Islamic Bank for Accelerating the Growth of MSMEs in Indonesia. From the existing data and previous research, it is known that BPRS plays a role in supporting Micro Small and Medium Enterprises because this Micro Small and Medium Enterprises plays a significant role in the economic growth of a country, even in developed countries though. Micro Small and Medium Enterprises are always discussed and studied to continue to be improved its role. When analyzed further, it will be seen that almost half of the total business in the world is a contribution from Micro Small and Medium Enterprises At the ASEAN level, more than 96 of existing companies are MSMEs and contribute to the GDP of each country with a range of 30 -50. The results of academic studies show that the success of MSMEs is a barometer of the health of a countrys economy. This study further reaffirms that MSMEs in a country have shown their role in the creation or growth of GDP. GDP is the sum of all final goods and services produced in a country at a particular period (Mankiw, 2012). Similarly in Indonesia, the role of micro, small and medium enterprises (MSMEs) is very important. The role of MSMEs in the Indonesian economy is so strategic is a reality that can not be denied. In addition, it can be seen from the Financial Crisis 1998, small and medium-sized businesses were relatively more resilient than large-scale enterprises. Micro, Small Medium Enterprises have significant role in employment creation and growth of gross domestic products of developing country. Indonesia, MSMEs account for more 99.9 percent of all firms and employ 96.2 percent of the workforce, the contribution of MSMEs to gross domestic product is 60.34. Based on Bank Indonesia (2016) report, MSMEs financing is given around 37.71 or Rp58.10 trillion. Seeing the number and role of large MSMEs make it as one of the pillars that follow keep the national economic machine keep spinning and continue to grow (Deni Arisandy et al., 2012). The definition of micro enterprises can be defining from definition of MSMEs itself which is in Indonesia is different. Some institutions or agencies even provide a definition of small and medium enterprises are not the same. Among them are the Central Bureau of Statistics, and Law no. 20 Year 2008. Central Bureau of Statistics provides the definition of SMEs based on the quantity of labour. Small-scale business is a business entity that has a workforce of 5-19 people, while medium-sized businesses are business entities that have a workforce of 20-99 people. According to Law No. 20 Year 2008, the so-called small business is an entity that has the following criteria 1. net worth more than Rp.50.000.000,00 up to a maximum of Rp.500.000.000,00 excluding land and building of business premises and 2. have annual sales of more than Rp.300,000,000.00 up to a maximum of Rp.2.500.000.000,00 Meanwhile, the so-called Medium Enterprises are business entities that have the following criteria 1. net worth more than Rp.500,000,000.00 up to a maximum of Rp.10,000,000,000.00 excluding land and building of business premises and 2. having annual sales proceeds of more than Rp.2,500,000,000. up to a maximum of Rp.50,000,000,000 Meanwhile, according to World Bank Small and Medium Enterprises grouped into three groups Medium Enterprise, with criteria 1. Number of employees maximum 300 people, 2. Income per year up to a number of 15 million and 3. Total assets up to a sum of 15 million Small Enterprise, with criteria 1. Number of employees less than 30 people, 2. Income per year not exceeding 3 million and 3. Total assets not exceeding 3 million and Micro Enterprise, with criteria 1. Number of employees less than 10 people, 2. Income per year does not exceed 100 thousand and 3. The amount of assets does not exceed 100 thousand. For more details this SMSEs grouping can be seen in the following table Based on the existing phenomenon and gap from the previous research, the researcher is interested to examine further the challenges and the role of sharia rural banks to develop success factors micro enterprises in Bandung city Indonesia. The research was conducted on micro enterprises in Bandung city because as known, micro enterprises in Bandung began to grow around the year 2000, and the number continues to show an increase every year. Below is the table of development of micro enterprises as one of MSME business from 2012-2016. Can be seen from the table above, the number of micro enterprises in Bandung continues to increase. The average increase of MSMEs in Bandung from 2010 to 2016 amounted to 192 or as much as 4 per year. As stated before, micro enterprises is an entity that have some criteria such as number of employee and revenue. Based on economic census 2016, Most establishments (94,23 percent) employed in West Java only less than 5 employees. Meanwhile, establishment with 100 or more workers were only 0.11 percent. It means most of the establishments in West Java were small scale establishment. Most of the establishment in West Java had low revenue. This can be seen from the revenue value received. As many as 4.59 million or 99.07 percent of establishments in West Java have 2.5 billion rupiah or less of revenue value. The majority of the establishments had maximum revenue value of 300 million rupiah. This was 89.63 percent of the total establishment. On the other hand, establishment with 2.5 billion rupiah of revenue value counted only for 0,93 percent. This data supported by the results of the 2016 economic census which stated that Bandung is a city that has the number of manpower and revenue in accordance with the criteria as a micro enterprises, ie enterprises with less than 5 employees as much as 314483 and less than 300 million of 294.650 enterprises . Besides that, Bandung received Natamukti Nindya award as the city with the best small and medium business development in Indonesia according to the assessment of Indonesia Council for Small Business (ICSB) and Ministry of Cooperatives and SMEs. Also, with the stipulation of the city of Bandung as a city driving cooperatives and SMEs with ratings Paramadhana Madya Nugraha Cooperative with a value of 82.10.di Indonesia, making the city of Bandung as a role model for other cities in empowering, developing and advancing the potential of MSMEs based on the award of the Minister of Cooperatives and SME. In addition, based on economic census data, the results increased by 9.96 compared to the results of the Economic Census of 2016 which amounted to 4.21 million businesses/companies, which by business scale, 4.56 million businesses/entrepreneurs (98.49) scale small micro enterprises and 0.07 million businesses/companies (1.51) large scale medium scale enterprises. The number of businesses/companies in West Java contributed 17.35 to the National figure or 28.57 to the total business/company in Java Island. Then, as with the national economic structure, census economic 2016 enrollment results show that the number of businesses/companies by business field is dominated by large and retail trade business of 2.19 million/company or 47.28 percent of all businesses/companies in West Java. Viewed from the aspect of labor according to the field of business, in line with the number of businesses/companies, dominated field of large and retail trade as much as 3.83 million workers or 33.69 percent of West Java workforce which reached 11.37 million people or 16, 17 percent of the national workforce or 25.51 percent of the workforce in Java. Beside that, description about micro enterprises can be seen from the number of MSMEs increase based on the existing sector in the guidance of the Department of MSMEs and Trade Industry of Bandung in 2017 as follows In addition, from the existing business type is known that MSMEs business in the city of Bandung is big enough to contribute to economic development (GDP) as can be seen in the following table As can be seen from Table 1.3 and 1.4, It is known that the three sub-industries that have the largest number and provide the largest contribution to the growth of PDb in the city of Bandung are Food and Beverage, Fashion and Handicrafts, although of the three industries have decreased since 2015. According to the Review of Bandung City Development Strategy (2016), the above conditions are due to several problems, such as the weakness of the quality of business actors in the trading industry (external), the unprofessional management of MSMEs, the low quality of small micro-industry products and the low quality of marketing access of MSMEs industry and micro and small trade, both formal and informal. Based on the background that has been described, then how the development of Micro Enterprises in Bandung City Indonesia, what are the success factors of Micro Enterprises in Bandung City Indonesia and the extent of Sharia Rural Banks/BPRS assist Micro Enterprises in Bandung City Indonesia became successful. So researchers interested to conduct further research, in the preparation of research dissertation entitled The Role and Challenges of Sharia Rural Banks in Developing Success Factors for Micro Enterprises in Bandung City Indonesia 1.2. PROBLEM STATEMENT In running their business, micro enterprises often experience difficulties and obstacles, which in the development of their business micro enterprises often face problems that include marketing, capital and management problems. Approximately 57 of micro and small enterprises in Indonesia experience difficulties in running their business, with the main difficulties faced are the capital difficulties of 31.11, raw material difficulties by 24.80, and marketing difficulties by 24.60 (BPS Indonesia , 2010). In other words, behind the micro enterprises s fairly good contribution to the national economy, it turns out that this sector still holds a myriad of very basic problems. Micro enterprises, still weak in business management capability, limited human resource quality, and weak access to financial institutions, especially banks (Adiningsih, 2001). This statement supports previous research by Urata (2000) which says that among the main problems faced by MSMEs is the number of MSMEs that have not been bankable, either caused by the lack of transparent financial management and lack of managerial and financial capability. This fact is supported by Robby Yuwono and RR Retno A. (2013) in his research to find the factors that inhibit the growth of micro enterprises found that one of the seven internal factors inhibiting the growth of micro and small enterprises in the formal sector is the financial or capital factor. Micro Enterprises Problem according to Soesilo, MA founder of SME Center Faculty of Economics and Business University of Indonesia, there are many factors that make SMEs did not grow or develop their business. First, there is no clear vision and mission. Secondly, there is no good record, especially about cash flow. Third, the difficulty of accessing capital. Micro enterprises do not have access to capital facilities and are considered not bankable for finance companies. Lack of finance Lack of marketing Innovation capability is low. Lack of Internal Control Lack of skill of manpower A high level of bureaucracy in government agencies Majority in villages This study looks at several aspects of BPRS role in micro enterprises success factors in Bandung city Indonesia. The study begins by examining several challenges which is influence role of BPRS for developing success factors of micro enterprises in Bandung city Indonesia. This study also explores the development of micro enterprises itself. Finally, information is presented from open-ended survey questions and in-depth interviews that demonstrate the role of BPRS and how it has impacted the developing of micro enterprises success factors in Bandung city Indonesia. 1.3 RESEARCH OBJECTIVES This study focuses on Islamic Microfinance Institutions, specialized Sharia Rural Bank (BPRS) and micro enterprises in Bandung city Indonesia. The aim of this study is to explore and evaluate the challenge and the role of BPRS for developing success factors of micro enterprises in Bandung city Indonesia., as an alternative solution to solve economic problems in the lower strata of the community, evaluate why BPRS as a Sharia Rural Bank lost the competition with other microfinance institutions in providing services to micro enterprises as we know Indonesia is a largest Moslem country in the world. In fulfilling these aims, the following objectives are developed To determine the development Micro Enterprises in Bandung City Indonesia To determine success factors of Micro Enterprises in Bandung City Indonesia To identify the challenges of what Sharia Rural Banks / BPRS in developing Micro Enterprises in Bandung City Indonesia To identify the role of what Sharia Rural Banks / BPRS in developing Micro Enterprises in Bandung City Indonesia To identify the extent of Sharia Rural Banks / BPRS assist Micro Enterprises in Bandung City Indonesia became successful. 1.4. RESEARCH QUESTION Based on the problem statement and research objectives that have been described previously, it can be formulated research question as follows How is the development of Micro Enterprises in Bandung City Indonesia What are the success factors of Micro Enterprises in Bandung City Indonesia What are the challenges of what Sharia Rural Banks / BPRS in developing Micro Enterprises in Bandung City Indonesia To what extent is the role of what Sharia Rural Banks / BPRS in developing Micro Enterprises in Bandung City Indonesia To what extent Sharia Rural Banks / BPRS assist Micro Enterprises in Bandung City Indonesia becomes successful I.5.THEORITICAL FRAMEWORK Sekaran (2009) said that the theoretical framework describes the interrelationship between more than one variable that is considered integrated in the dynamics of the situation being investigated / investigated. After the problem has been identified, the next step is to do a literature review to look for variables that are related / have a contribution to the problem. After these variables are identified, then elaborating the relationship / relationship between these variables, then derived into the relevant hypothesis. Theoretical framework will then become the basis for the entire research process. Below the researcher makes a theoretical framework for this research. Referring to the theoretical framework diagram above, it can be made a theoretical explanation in this research is Agency Theory which is using as grand theory. This theory is used because agency theory is the theoretical basis underlying the companys business practices used so far including Micro enterprises. The theory is rooted in the synergy of economic theory, decision theory, sociology, and organizational theory. According to Jansen (1976) and Meckling (1976) agency theory are agency relationships that arise when one or more people (principals) employ other people (agents) to provide a service, then delegate decision-making authority to the agent. The main principle of this theory states the existence of a working relationship between the party giving authority (principal) ie the investor with the party who receives the authority (agency) ie manager, in the form of a cooperation contract called nexus of contract. Agency theory derives from the assumption that the individual maximizes the expected level of satisfaction through adequate resource capacity and innovation in action so that disclosure issued by reference to agency theory is part of the benefits expected by the individual with a particular action. According to Eisenhard (1989), agency theory is based on three assumptions (a) assumptions about human nature, (b) assumptions about organizational, and (c) assumptions about information. Agency theory can be seen in Figure 1 as follows Assumptions about human nature emphasize that human beings have selfishness (self interest), have bounded rationality (bounded rationality), and do not like risk (risk aversion). Organizational assumptions are conflicts among members of the organization, efficiency as productivity criteria, and the presence of Asymmetric Information (AI) between principals and agents. While the assumption about information is that information is seen as commodity goods that can be traded. The essence of agency theory is the proper design of contracts to align the principal and agency interests in the event of a conflict of interest (Scott, 1997) (Loudon and Loudon, 2007). Agency theory focuses on two individual parties namely principals and agents. Principal is defined as the party giving the mandate to another party, called the agent, to be able to act on behalf of the agent. Agent, as a party who is given the mandate to run the funds from the owner (principal) must be accountable for what has been mandated. On the other hand, the principal as the party giving the mandate will provide incentives to the agents of various facilities both financial and nonfinancial. Problems arise when both parties have different perceptions and attitudes in terms of providing information that will be used by the principal to provide incentives to agents. Agency theory has the following objectives 1. To enhance the ability of individuals (both principals and agents) in evaluating the environment in which a decision should be made (The Belief Revision Role). 2. To evaluate the results of the decisions taken to facilitate the allocation of results between the principal and the agent in accordance with the approval in the contract of employment (The Performance Evaluation Role). The agent has information on the operation and performance of the company in real and comprehensive terms, will not give all the information to the principal. Conversely, principals who require information on their ownership, have access to limited internal corporate information. This situation is inseparable from other assumptions in agency theory that there is a conflict between principals and agents. This contradiction will become even more evident if agents make systematic efforts to limit the movement of principals, by increasingly away from the principle of information transparency. The existence of this condition indirectly will cause the cost of observation for the principal which can be Expenditures on observations that draw the attention of the principal. Expenditures on contractual engagement with agents. Residual loss. An increasingly sharp contrast will lead to prolonged dysfunctional conflicts. Each side will try as hard as possible to maximize utility. In addition, the utility will face constraints, so that the principal will not reach the maximum utility level as expected, so what will happen is a state called optimal pareto. Pareto optimal is a situation that occurs when the activities of reallocation of production or consumption does not allow all parties to be better without making one party become weaker. With the achievement of optimal pareto, the optimization of utility is not only seen from one party only, but from various parties. Agency relationships in banking companies are more complex when compared to bank companies. In a banking company other than the agents relationship with the owner, there is also an agent relationship with the debtor and the agent with the regulator. Bank management has a tendency to gain the most profit with the cost borne by the principal. This behavior is often referred to as rational or bounded rationality limitations and does not like to bear risk or risk adverse (Taswan 2010). From the explanation of agency theory and the role of rural banks in the development of micro enterprises, it can be seen that those who have a position as principal is a bank because rural banks in this case invest some fund or as investors who have capital while those who have the position as an agent is micro enterprises because these micro enterprises receive authority in the form of funding from rural banks. In other word, as focus of Agency theory stated that the role of rural bank as principal is defined as the party giving the mandate to another party, called the agent, to be able to act on behalf of the agent. Meanwhile SMEs as Agent, is a party that given the mandate to run the funds from rural bank (principal) must be accountable for what has been mandated. On the other hand, rural bank as the party giving the mandate will provide incentives to SMEs of various facilities both financial and nonfinancial. Further, from figure 1.3 can be seen that Sharia Bank has relationship with SMEs, which Sharia banks have a role in the success of SMEs. The role of the rural bank includes financing, by channelling credit to MSEs, especially in the long term and conducting business coaching in order to improve the financial performance of MSEs that receive credit. This statement was reinforced by several previous studies that investigated the role of rural banks in SMEs, such as those carried out by Hamzah and Gazali (2015) stated that both industries (Islamic financing and Islamic Micro Enterprise) are in significant relationship as having the same objective which is to perform as accordance with Maqasid AlShariah, Faisol (2017) stated that the Islamic bank financing has significant influence with a positive direction on the SMEss performances. Purnamasari and Darmawan (2017) stated that the interaction between SMEs and Islamic banking is quite close relatively but need to be upgraded. Yussuf (2017) stated that that Islamic banking helps SMEs to grow financially which enhances their financial performance. Suharto and Fasa (2017) explains how the Problems and Challenges of MSMEs in Indonesia Development of MSMEs in Indonesia Relationship Between Islamic Bank and MSMEs in Indonesia The Role of Islamic Bank for Development MSMEs and The Challenges of Islamic Bank for Accelerating the Growth of MSMEs in Indonesia. For further to know about concept of Rural bank and SMEs itself, in the following points will be explained more fully for the theoretical basis of each term microfinance and micro enterprises, Sharia Rural bank and SMEs to be discussed in this study. 1. Microfinance Ledgerwood (1999) stated that microfinance refers to the provision of financial services (savings and credit) to low-income customers. Asian Development Bank (ADB) defines microfinance as the provision of a broad range of financial services such as deposits, loans, money transfers, and insurance to small enterprise and households. CGAP3 (2003) defines microfinance as a credit methodology that employs effective collateral substitutes to deliver and recover short-term working capital loans to micro entrepreneurs. Further CGAP (2013) stated that term microfinance, once associated almost exclusively with small-value loans to the poor, is now increasingly used to refer to a broad array of products (including payments, savings, and insurance) tailored to meet the particular needs of low-income individuals. People living in poverty, like everyone else, need a diverse range of financial services to run their businesses, build assets, smooth consumption, and manage risks. Another definition from the International Labour Organization (ILO, 2014) establishes that micro-finance is an economic development approach that involves the provision of financial services through institutions to low income clients. Microfinance Institution Microfinance Institution is a provider of financial services for small and micro entrepreneurs and serves as a development tool for rural communities (Ledgerwood, 1999). Manurung and Rahardja (2004) stated that MIcrofinance Institutions or LKM is a financial institution that provides services to low income and poor people and small entrepreneurs. According to other experts, MFIs are defined as providers of financial services for small and micro entrepreneurs and serve as a development tool for rural communities (Soetanto Hadinoto, 2005). Meanwhile, according to the Directorate of Financing (Deptan) (2004) cited by Ashari (2006) that MFIs are developed based on the spirit to help and facilitate the poor for both the consumption and productive activities of the poor families. Karim et al. (2008) defines a microfinance institution as an institution targeting the poor and whose average income loan size is less than 250 percent of the countrys gross domestic product per capita. Based on Act no 1 of 2013, in Chapter I, Article I and paragraph I it is explained that Micro Finance Institution hereinafter abbreviated as MFI is a financial institution specifically established to provide business development services and community empowerment, either through loans or financing in scale business micro to the members and the community, the management of deposits, as well as the provision of business development consulting services that are not solely for profit. According to the Asian Development Bank (ADB), MFI is a provider of deposit services, loans, payment services and money transfers aimed at the poor and small entrepreneurs. While the form of MFIs can be formal institutions such as village banks and cooperatives, semiformal institutions such as nongovernmental organizations and informal sources such as money-lenders. While OJK defines microfinance institutions as specialized financial institutions established to provide business development services and community empowerment, either through loans or financing in micro-scale enterprises to members and communities, savings management, or the provision of business development consulting services that are not merely seeking. According Arsyad (2008 23) Micro Finance Institution (MFI) is institutions that provide financial services to micro-entrepreneurs and low-income, formal, semi-formal, and informal communities that are not served by formal financial institutions and are market-oriented for business purposes . Thus the MFI serves as an institution that provides various loan services, both for productive activities undertaken by micro businesses, as well as for consumptive activities of poor families. As a savings institution, MFIs can raise funds that are used as a prerequisite for credit even though in the end often the amount of credit given is greater than the funds collected 3. Sharia Rural Bank (BPRS) Sharia Rural Bank (BPRS) is a bank conducting business activities based on Sharia principles which in its activities do not provide services in the payment traffic. The legal form may be Limited Company, Cooperative or Regional Company (Article 2 PBI No. 6/17 / PBI / 2004). Law Number 21 Year 2008 stipulates that the Sharia Peoples Financing Bank (BPRS) is a Sharia Bank which in its activities does not provide services in the payment traffic. Noteworthy of the above provisions is the extension of the Sharia Rural Bank in the form of Rural Bank Sharia. This means that all legislation that calls the Sharia Rural Bank with the Sharia Rural Bank should be read with the Sharia Peoples Financing Bank (BPRS). Article 1 of Law no. 21 of 2008 concerning General Provisions mentioned the definition of the Sharia Peoples Bank (BPRS) is a Bank Sharia which in its activities do not provide services in the payment traffic. While Article 2 of Law no. 21 Year 2008 explained that Sharia Banking in conducting its business activities based on Shariah principle, economic democracy, and prudential principles. BPRS is a MFI that is transformed by fulfilling the minimum capital requirement of Rp 6 billion, is required to adjust the articles of association, incorporate legal minimum capital requirements, meet the requirements of directors and board of commissioners, and have adequate infrastructure and human resources. OJK determines the coverage of a single district area. In addition, this BPR is a microfinance institution conducting business activities in excess of 1 (one) Regency / City region in which the MFIs position has an equity of at least 5 (five) times of the minimum paid up capital requirement of the RB and the amount of third party funds in the form of Deposits collected in the last 1 (one) year at least 25 (twenty five) times of the minimum paid up capital requirement of the RB. BPRs are said to be microfinance institutions, because the main priorities of their services are individuals and / or small-scale entrepreneurs (SMEs). But BPRS in developing is facing some problems. The problems identified by OJK include internal BPR factors such as lack of capital, lack of management, lack of governance, lack of IT system and government policy and also external is the lack of knowledge / information and Lack of access to credit. 4. Micro enterprises Micro enterprises are defined in different ways depending on the country and other aspects. Therefore, it is necessary to conduct a special review of these definitions in order to obtain an appropriate understanding of Micro enterprises, namely to adhere to quantitative measures in accordance with economic progress. In Indonesia, there are different definitions of Micro enterprises based on the interests of institutions that define. According to Law Number 20 Year 2008 regarding Micro, Small and Medium Enterprises (MSMEs), Micro Business is productive business owned by individual or individual business entity fulfilling the criteria of Micro Business as stipulated in the Law. At the world level or in other countries, there are different definitions of Micro enterprises according to the characteristics of each country the definition is that in principle the definition and criteria of Micro enterprises in foreign countries is based on the following aspects 1. Number of manpower. 2. Revenue. 3. Total assets. World Bank, divided MSME into 3 types, namely 7 a. Medium Enterprise, with criteria 1) Number of employees up to 300 people 2) Income per year up to a total of 15 million 3) Total assets up to a total of 15 million b. Small Enterprise, with criteria 1) Number of employees less than 30 persons 2) Income per year not exceeding 3 million 3) Total assets not exceeding 3 million c. Micro Enterprise, with criteria 1) Number of employees less than 10 people 2) Income per year does not exceed 100 thousand 3) Total assets do not exceed 100 thousand. Further, according to Law no. 20 year 2008, the purpose of empowering Micro enterprises are Realizing a balanced, emerging, and equitable national economic structure Growing and developing the ability of Micro enterprises into a strong and independent business Increasing the role of Micro enterprises in regional development, job creation, income distribution, economic growth, and poverty alleviation Micro enterprises as one of MSMEs have an important role in development economy, due to the relatively higher labor intensity and smaller investment, so that micro enterprises are more flexible in dealing with and adapting to market changes. Therefore, the development of micro business can contribute to the economic diversification and the change of structure as a precondition of long-term stable and sustainable economic growth. Besides, the level of job creation is higher in micro business than in big companies (Sutrisno and Sri, 2006). The role of micro enterprises in the Indonesian economy is at least visible from (Ministry of Cooperatives and SMEs, 2005 in Neddy, 2006) Its position as a major player in economic activity in various sectors of the largest employer providers Significant players in the development of local economic activities and community empowerment Creators of new markets and sources of innovation Its contribution in maintaining balance of payments through export activities. According to Prawirokusumo (2001), the important role of Micro enterprises is inseparable from the characteristics of MSMEs, including Flexible, in the sense that if faced with obstacles in running the business will easily move to another business. In its capital is not dependent on capital from outside, but also can grow with the power of own capital. In the case of loans (especially small entrepreneurs certain sectors such as traders) are able to repay loans with high interest rates. Micro enterprises are scattered throughout Indonesia with business activities in various sectors. In addition, according to Bank Indonesia, there are several strategic roles of Micro, Small and Medium Enterprises, among others The number of Micro, Small and Medium Enterprises is large and is found in every sector of the economy. It absorbs a lot of manpower and every investment creates more job opportunities. Have the ability to utilize local raw materials and produce goods and services that the public needs at affordable prices Significance of the study This study focus on the challenge and roles of BPRS in developing Micro Enterprises in Bandung City Indonesia can enable a better understanding of development dynamics in Indonesia and the importance of Islamic microfinance institutions built around these institutions in this process. In other words, this research have significance such as A study focusing on the roles of BPRS in developing success factor of micro enterprises in Bandungcan enable a better understanding of development dynamics in Indonesia and the importance of BPRS built around these micro enterprises in this process This study will enable the government get to know the problems facing micro enterprise especially in the area of Islamic microfinance institutions and realized how difficult the porches is, and device a measure to solve the problems. Through this study the government will consequently be able to know how to uplift the status of micro enterprises. The significance of this study enables the researcher widens their scope of knowledge in microfinance institutions financing of businesses. In other words, this study also discusses the gap between some previous studies The findings of this study might be considered useful for formulating policy related to BPRS in developing micro enterprises in Bandung city- Indonesia. RESEARCH METHODOLOGY AND FRAMEWORK To fulfil the research objectives, this research adopts Mixed Method, a method that combines both qualitative and quantitative approaches in terms of methodology (as in the data collection phase), and mixed model studies incorporates two approaches in all stages of the research process (Sugiyono, 2013). The Mixed Method is also referred to as a methodology that provides philosophical assumptions in pointing directions or providing guidance on how to collect data and analyze data as well as a combination of quantitative and qualitative approaches through several phases of the research process. It is expected that, by adopting this mixed method, this study will produce the most reliable and valid results. The mixed method used in this study is that the concurrent triangulation method collects quantitative and qualitative data concurrently (at a time), then compares these two databases to determine whether there is convergence, differences, or some combination. This method generally applies quantitative and qualitative methods separately to cover / balance one methods weaknesses with the strengths of other methods (or vice versa, strength of one method adds another methods strength) (Creswell, 2013). Thus, it involves quantitative data collection based on purposive sampling through questionnaires distributed to Micro Enterprises in Bandung City Indonesia that borrow from BPRS based on the big 3 micro enterprises in Bandung city such as Food and Beverage, Fashion and Handicrafts which amount of that micro enterprises in 2017 are 143 micro enterprises. In order to accurately describe the variables studied, the researchers took all the population as samples. Therefore, sampling in this study using the method of sampling saturated. Saturation sampling method or other term census is a technique of determining the sample when all members of the population used as a sample, so the number of samples in this study amounted to 143 micro enterprises in Food and Beverage, Fashion and Handicrafts. The qualitative data gathered from semi-structured interviews with the Directors/Managers of BPRS are analyzed by Miles Huberman analysis through three stages Data reduction Data presentation Conclusion and verification of data. Data collected was there after processed and analyzed. There was an establishment of categories, then the application of these categories to raw data through coding, tabulation and then drawing statistical inferences. The data was condensed into a few manageable groups and tables for further analysis. Data was coded statistical package for social scientists (SPSS) helped to summarize the coded data and facilitated quick interpretation. Qualitative data was presented against study objectives and analyzed using explanations. Quantitative data was generated through data coding that yielded numbers. These numbers were analyzed using a computer package (SPSS) that yielded descriptive and inferential statistics to answer research questions and relationships of variables and analysis of variance. Descriptive statistics were used to summarize and describe data. Figures, bar graphs, percentages and frequency tables were used to present the results. Eni Suharti, Undang-undang Usaha Mikro Kecil Dan Menengah UMKM (Jakarta Sinar Grafika 2008) h.3 Y, dXiJ(x(I_TS1EZBmU/xYy5g/GMGeD3Vqq8K)fw9
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