The Challanges of Islamic Bank for Accelerating the Growth of Micro , Small and Medium Enterprises ( MSMEs ) in Indonesia

Islamic banking has a huge role in accelerating the growth of Micro, Small and Medium Entrerprises (MSME)s in Indonesia. The largest Muslim population in Indonesia is one factor for the development of MSMEs. This paper 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 Challanges of Islamic Bank for Accelerating the Growth of MSMEs in Indonesia. The end of this paper, the authors offer solutions to Islamic banking challenges in accelerating the growth of MSMEs such as: First, to improve mudhorobah and musyarakah financing schemes to accelerate and develop MSMEs in Indonesia; Secondly, to reduce the dependence on the use of Murabahah contract products that are consumptive and targeted middle and upper only, Third, improve the financing scheme Qordhul Hasan contract by cooperating against Islamic social institutions, such as BAZNAS, BAZDA, LAZ, BWI, and Mosque, etc by maximizing the utilization of zakat funds, infaq, alms, waqf which has been only consumptive. Fourth, the cooperation of linkage program to BPRS and BMT so that the funds channeled can be directed to remote areas and on target. Fifth, coaching, mentoring, and mentoring to BPRS, BMT, MSMEs business practitioners, and Islamic social institutions in order to develop funds that are stored productively. Sixth, allocate Hajj and umroh investment funds to MSMEs business practitioners.


Introduction
Research into small and medium sized enterprises (SMEs) has grown during the last decade.A huge majority of firms worldwide are SMEs, and they play a significant role in the economy.
Consequently, the performance of the SME sector is closely associated with the performance of the nation (Islam, et.al, 2011: 289).Bhasin and Venkataramany, (2010: 95) state that Small and medium sized enterprises (SMEs) are a key engine of growth for Indonesia"s economy as they are for most developing countries in South and Southeast Asia.Small Medium Enterprises (SMEs) have significant role in employment creation and growth of gross domestic products of developing country.In the case of Indonesia, SMEs account for more 99.9percent of all firms and employ 96.2 percent of the workforce.However, in order to grow and contribute more to the economy, SMEs face some constraints, such as: (1) lack of finance and marketing difficulties, (2) SME innovation capability is low, (3) representation of women entrepreneurs is still relatively low and can be attributed to the low level of education and cultural / religious constraints (Tambunan, 2011: 68).
The main constraints faced by SMEs is the lack of finance.Islamic bank financing products may help to solve this problem.
The Islamic participatory schemes, such as mudarabah and musharaka, integrate assets of lenders and borrowers; Therefore, they allow Islamic banks to lend on a longerterm basis to projects with higher riskreturn profiles and, thus, to support economic growth.However, as Islamic banks try to avoid uncertainties, the mentioned schemes are not used (Huda, 2012: 179).
Based on this, our paper will discuss more deeply related problems, barriers and root problems related to the development of SMEs in Indonesia, and identify the role of Islamic banking in accelerating the growth of SMEs in Indonesia.

Indonesia
SMEs have historically been the main player in domestic economic activities.

Development of MSMEs in Indonesia
The In (2) Re-examine the effectiveness of policies to encourage the formation of clusters, to reserve certain industries for small firms alone, and to require foreign direct investors to partner with local SMEs.*data developed from sharea banking statistics September, 2017

MSMEs in Indonesia
The following is the data of Islamic banking fund distribution in Indonesia  Secondly, the financing scheme starts from qardh contract, then if the poor already have business progress then, the financing scheme will increase into qardhul hasan, mudhorobah, and musyarakah scheme.
Third, the allocation of funding refers to 8 asnaf, namely: indigent, poor, amil, convert, riqab, fisabilillah, and ibn sabil.From the above discussion, the following is an offer in the formation of Islamic Social Capital: sales can spin between communities, then the economy will run smoothly.

SOURCE OF FUND SCHEME OF FINANCING ALLOCATION
Indonesia has been through a very rough patch in its development since independence in 1949.It is the fourth largest country in the world in terms of population and the world"s third largest democracy, the world's largest archipelagic state, and home to the world's largest Muslim population.It is facing numerous challenges significant as SMEs contribute to the improvement of income distribution, employment creation, poverty reduction, rural development, industrial development, and export growth.For low income households in rural areas, such enterprises especially micro-and small ones have also assumed a significant role as an important engine for the development of rural economy and communities' wellbeing (Abdullah and Hoetoro, 2011: 36).SMEs still face many challenges, domestic and external, which could hinder their resilience and competitiveness.They include: i) Ongoing difficulties in obtaining funds from financial institutions and the government.Usually the interest charges by financial institutions on loans borrowed by SMEs are high, and this is compounded by a lack of financial transparency by SMEs, ii) A lack of human capital is the most significant challenge facing SMEs.It is often too expensive for SMEs to employ a professional and competent workforce, iii) A high level of bureaucracy in government agencies hinders efficient SME business development operations, iv) A low level of research and development expenditure and v) A substantial orientation towards the domestic rather than international market been done to date, namely: (a) Assessment of institutional health of cooperatives; (b) Capacity enhancement of cooperative human resources through Education and Training and Technical Cooperative Guidance; (c) Facilitation of People's Business Credit (KUR); (d) Facilitate Revolving Fund through LPDB-KUMKM.Mourougane (2011: 33) recommends the strategy to foster SME productivity: First, Business environment and labour market: (1) Systematically review all significant existing business licensing requirements at the national and local levels, with a view to simplification and ensuring they remain costpublic outlays on costeffective infrastructure projects beyond what is already planned.(3) Lower electricity subsidies and have recourse to cash-transfer schemes to compensate poor households for the rise in electricity price.(4) In provinces where minimum wages are high in relation to average wages, resist increases that exceed trend productivity gains.Introduce a sub-minimum wage for youth directly linked to the general minimum wage.Reduce onerous severance payments and ease dismissal procedures in the formal labour market.In return introduce unemployment benefits coupled with individual unemployment saving accounts.(5) Improve the enforcement of intellectual property rights.Second, Access to finance: (1) Clarify property rights for land.(2) Make the information collected by the credit bureau available to all non-bank financial institutions.(3) Remove the tax exemptions granted to venture-capital companies to support investments in some industries and the existing restriction of 85% on foreign ownership of such companies.(4) Step up efforts to pass a new micro-finance law, and expand the coverage of the regulatory framework.Third, Human capital: (1) Extend conditionality in income-support programmes to include attendance in secondary education.Increase the perstudent transfer under the School Operations Fund (BOS) programme for schools located in remote areas and catering for poor students or alternatively increase conditional cash transfers.(2) Rigorously assess the cost-efficiency of all programmes aimed at upgrading dropouts and workers' skills, and phase out those found to be inefficient.(3) Remove formal education from the negative investment list.(4) Encourage tertiary education financing through student loans.(5) Create a national training fund to consolidate resources allocated to training and direct them to their most cost-efficient use.Fourth, Policy support: (1) Clarify government responsibility in the delivery of support to small firms.Regularly assess the efficiency of existing programmes, phase out inefficient measures, and redirect resource to the most cost-effective schemes.
schemes, such as mudarabah and musyarakah, integrate assets of lender and borrowers; therefore, they allow Islamic banks to lend on a longer-term basis to projects with higher risk-return profiles and, thus, to support economic growth.
scheme of Islamic Bank funds is only slightly when compared with Conventional Banking.It is reasonable to observe from the historical development of conventional banks that are much longer standing when compared with Islamic banks.Second, scheme that still dominates in Islamic banking and always above 50% every year.Sixth, the difficulty of middle to low society to get sharia banking financing scheme.This is due to concerns of Islamic banks in

Details 2012 2013 2014 2015 Micro, Small and Medium Enterprises Business field
revolving fund as of December 31, 2016 is the business sector of Trade, Hotel and Restaurant with loan / financing amounting to Rp.4.061.079.831.350(50.2%) and business sectors that absorb the least and LPDB-KUMKM is the business sector of electricity, gas and water supply with loan / financing amount Rp.35.846.688.731(0.4%) as the following table: The absorption of revolving funds by business sector in 2016 *Annual Report of Ministry Of Cooperation And Small And Medium Business In 2016