ANALYSIS OF ISLAMIC BANK INFLUENCE ON AGRICULTURAL FINANCING SECTOR PERIOD 2014-2016

One main problem that Indonesia’s agricultural sector faces is limited financial acces. This research tries to analyze Islamic Banking influence on agricultural financing sector in Indonesia. It utilizes monthly data of Islamic banking statistic from January 2014 until December 2016. This study conducts OLS (Ordinary Least Squares) as its analytical method to intrepret the data analysis. The finding of this paper shows that the incentive of Islamic Bank Indonesia Certificate (SBIS), third party fund, inflation, Non Performing Financing influence agricultural financing significantly. But, interest rate is not affecting agricultural financing. This research suggests the increase in agricultural financing proportion for agriculture should be in accordance with increase in total deposit value. This finding recommends improvement of the human resources competency in agriculture sector as well as strengthening instruments of Islamic financing policy.


INTRODUCTION
As one of the sectors that play an important role in the national economy, the agricultural sector still faces several obstacles including the lack of access to financing sources, therefore, there is a need for a financing model that is able to provide stimulus to agricultural businesses to increase their production, the majority of farmers in Indonesia who only have small-scale businesses, namely the agricultural sector in general still rely on their own capital in the development of their business (Beik 2013).
As an agricultural country, the agricultural sector has a very strategic role in national development. The importance of the agricultural sector among other sectors is as a source of livelihood for the majority of the population in Indonesia. It has also contribution to GDP, the exports, industrial raw materials and the provision of food and nutrition. The agricultural sector also proved to be able to support the national economy in the event of an economic crisis (Ashari 2005). Although very strategic, the agricultural sector is often faced with many problems, especially weak capital as an essential element in increasing the production and living tariffs of rural communities, the lack of capital can limit the movement of this sector.
In addition, the problem of bankability and perceptions of banks that consider agriculture as a high risk industry are the two factors that cause low rates of lending and bank financing in the agricultural sector. While the weak access of small farmers to banking financial institutions is caused by non-simple procedures and requirements that must be met by farmers.
On the other hand, the banks themselves are less interested in financing the agricultural sector which is considered high risk, both due to natural disturbances such as floods, droughts, pest and plant diseases, and price fluctuations (Beik 2013). For this reason, it is necessary to develop appropriate and responsive strategies in managing the development of the agricultural sector so that Indonesia has a strong bargaining position. Agricultural development is directed to increase farmers' income through increased farming productivity and value-added products, as well as agricultural product distribution. This aspect requires funding in the form of financial support in the form of working capital.
Agricultural financing in conventional banks is considered to be less effective because of the interest set by the government.
This makes farmers as additional returns, the financing gap between the borrower and the funder where the two parties are not in full synergy, each moves itself in a different calculation because the creditor is using more monetary sector analysis while the debtor in the real sector activities. The banking sector has not provided optimal support in increasing the amount of lending and the ease of obtaining capital loans to the agricultural sector, especially small farmers. Therefore an alternative source of financing is needed for the agricultural sector. One alternative that can be developed is financing through Islamic banking. With the characteristics of Islamic banking based on the real sector, the pattern of Islamic financing for the agricultural sector is expected to be well developed (Nasution 2006).
In the world of banking itself consists of two forms, namely conventional and Islamic banks. The conventional bank in its activities uses an interest system that is inspired by the capitalist economic system by attracting business profits mainly from credit interest which is utilized through public savings funds which are then borrowed back with additional interest, while the Islamic banking principles are based on Islamic law and does not recognize interest but profit sharing.

Definition of Islamic Banking
The Bank is a financial institution, which is an entity that functions as a financial intermediary or financial intermediary of two parties, namely the party that is over-funded and the party that is under-funded. As an important institution in the community, the bank is a financial institution whose main business provides credit and services in payment traffic and money circulation (Sinungan 1993). Bank is simply defined as financial institution whose business activities are collecting funds from the community and channeling the funds back to the community and providing other bank services (Kasmir 2010).
Islamic banks are banks that are in their activities, both fund raising and in the context of channeling funds to provide and impose compensation on the basis of sharia principles, namely buying and selling and profit sharing. Islamic banks are referred to as banks without interest because in raising funds do not provide interest payments, and in loans are not charged interest.
Islamic banks are referred to as banks without interest because in raising funds do not provide interest payments, and in loans are not charged interest (Herman 2006).
According to Muhammad (2005) Islamic banks are banks that operate without relying on interest. Islamic banks or commonly referred to as interest-free banks are financial / banking institutions whose operations and products are developed based on the Al-Quran and Sunnah. In other words, Islamic banks are financial institutions whose main business provides financing and other services in payment traffic as well as circulation of money whose operations are adjusted to Islamic law. Islamic banks are banks that carry out their business activities based on Islamic principles, namely the rules of interbank agreements with other parties (customers) based on Islamic law. So the difference between the Islamic banks with a conventional bank is located on the basic principle of operation that does not use interest, but use the principle of sharing, buying and selling and other principles in accordance with the Islamic Shari'a, because the flower is believed to contain elements of usury is forbidden (prohibited) by Islam. (Rivai 2007).

sector in Indonesia
At present the national bank's alignment with the agricultural sector is very low. Based on BI data, national bank lending as of Therefore, the role of Islamic banking is expected to drive the agricultural sector in Indonesia.
Islamic banks are more appropriate to play a role in agriculture than conventional banks. This is based on several things. First, because philosophically, Islamic banking has strong ties with the agricultural sector. Farmers who have been accustomed to profit sharing systems such as maro, gaduhan and others make it easier for Islamic banks to enter the heart of the agricultural sector. Second,

Role of Agriculture Industry
Agricultural Agriculture Sector is an industry that organizes production factors (land, minerals, capital, management, labor) to produce and market food and fiber (Purwaningsih 2017) . For a country that will carry out its economic development, there are a number of choices that will certainly be adopted. There is a country that in its economic development relies on the industrial sector and then follows other sectors. There are countries that prioritize the agricultural sector than others. And there are also countries that choose a combined alternative, namely balancing between the industrial sector and the agricultural sector. In

addition, in reality agriculture is indeed an important sector in the
Indonesian economy because up to now around 63 percent of the population is foraging in the agricultural sector (Prayitno 1985).
The agricultural sector can be classified into several sub-sectors, namely the food crop sub-sector, the plantation sub-sector, the livestock sub-sector and the fisheries subsector.

Certificate of Islamic Indonesia Bank (SBIS)
Bank Indonesia legislation Number 10/11 / PBI dated March 31, 2008 concerning Bank Indonesia Sharia Certificates. Bank Indonesia Sharia Certificates (SBIS) are securities based on short-term Sharia Principles in rupiah currency issued by Bank Indonesia.

Third Party Funds (TPF)
The bank's efforts in raising funds dominantly affect the development of the bank. In finding sources of bank funds, banks must consider factors such as the level of ease in obtaining the source of funds or the costs incurred by the bank to obtain it.
Sources of funds from the community are the main source of funds for banks. This source of funds is easy to find and is also available in large numbers in the community and the conditions are not too difficult.Banks only need to attract the public by providing promos or providing products that are easy to terms and conditions.
Based on Bank Indonesia Circular No. 6/23 / DPNP dated May 31, 2004 the funds entrusted by the community to the bank can be in the form of demand deposits, savings deposits. After fundraising, bank wouldi redistribute these funds to the public or better known as credit (Kasmir 2001).Credit is the bank's most important activity in generating profits (Dendawijaya 2003).
Like financing theory Karim (2004) stated that one source of funds that can be used for financing is own capital, so that the greater the available funding sources, the bank will be able to channel financing in the larger maximum limit, especially in the agricultural sector.

Inflation and Islamic Perspective
The inflation definition is as varied as we can find in the economic literature. This diversity of definitions occurs because of the extent of the influence of inflation on various sectors of the economy. The close and broad relationship between inflation and various sectors of the economy gives rise to our differences in understanding and perception of inflation, as well as in formulating policies for the solution. However, in principle there are still some unity of view that inflation is a phenomenon and economic dilemma. Inflation is a condition that indicates the weakening of purchasing power which is followed by the decreasing real value of a country's currency.
According to Islamic economists, inflation is very bad for the economy because of the following four thing. First, it causes disruption to the function of money, especially to the function of savings (saving value), the function of upfront payments, and the function of unit calculations. Second, as a result of the inflation burden, people must break away from money and financial assets.
Third, there are weakening the spirit of the community to save (the decrease in marginal propensity to save) and increasing tendency to shop, especially for non-primary and luxury goods.
Fourth, direct investment in unproductive things such as the accumulation of wealth in the form of land, buildings, precious metals and foreign currencies as well as sacrificing productive investments such as agriculture, industry, trade and transportation (Karim 2010).

Relation of of Inflation Levels to Financing
Inflation is a general increase in the price of goods / commodities and services continuously in a certain period.
Inflation can cause disruption to the savings function (value of deposits). Islamic anks as one of the players in the banking finance industry are not spared from the effects of inflation.
The close and broad relationship between inflation and various economic sectors gave rise to our differences in understanding and perception of inflation, as well as in formulating policies for the solution. However, in principle there are still some unity of view that inflation is a phenomenon and economic dilemma.
Inflation is a condition that indicates the weakening of purchasing power which is followed by the declining real value of a country's currency (Khalwaty 2000).
Inflation can cause a high risk of default. This risk will increase non-performing financing of Islamic banking. So that when the inflation rate is high, the bank will be very careful in distributing financing. In addition, inflation can also put pressure on Islamic banks in terms of raising funds from the public, rising and falling inflation will affect the level of public saving, so that it will affect the financing of Islamic banks

Non Perfoming Loans
In the banking business, the most profit is from financing or providing credit to the public. Although financing is one of the sources of bank income, financing also has risks, namely the occurrence of non-performing financing such as substandard loans, doubtful financing and bad financing. Non Performing Financing is a credit that is classified as doubtful and loss. The terms doubt and loss here refer to the Bank Indonesia provisions adopted by Indonesian banks. Whereas according to Suhardjono Financing is a problematic financing which is categorized as loss.

Research Variables
The definition of the research variable is something in the form of what is determined by the researcher to be studied until information is obtained about it, then drawn conclusions. In this study.
Independent variables are variables that influence or cause changes or the occurrence of the dependent variables (Sugiyono 2004 (Sugiyono 2004). In this study the dependent variable is the financing of Islamic banks in the agricultural sector in Indonesia. Dajan (1996) stated that the population is the whole element which has one or more of the same characteristics or characteristics.

Population and Sample
The population used in this study is a report on Islamic banking statistics. The sample according to Sugiyono (2004) is part of the number and characteristics possessed by the population.
The sample taken in this research is a report on Islamic banking statistics for three years from 2014-2016. In this study the authors used convenience sampling, namely the sample members that selected based on the ease of obtaining data to measure

Data Collection Method
The data obtained in this study is secondary data derived from literature / other sources from inside and outside of Islamic banking, while data collection techniques are as follows Secondary data Secondary data is data obtained from other parties

Data Analysis Model
To examine the influence model and the relationship of the independent variables which are more than two variables to the dependent variable, multiple linear regression method is used (Ghozali, 2006

Multicollinearity Test
Test Multicollinearity test aims to test whether in the linear regression model there is a correlation between period t disturbing errors with confounding errors in the t-1 period (Ghozali 2006). Multicollinearity means that there is a strong linear relationship between independent variables with one another in the regression model. A good regression model is that there is no linear correlation / strong relationship between the independent variables. If there is a symptom of multicollinearity in the regression model, then the regression model cannot appraise precisely so that the wrong conclusions about the variables studied are obtained.

Autocorrelation Test This test aims to test whether in a linear regression model
there is a correlation between confounding errors in period t with confounding errors in the period (Ghozali 2006)   Whereas if the test of the degree of determination approaches 1 then it can be said that the stronger the model is in explaining the variation of the independent variables on the dependent variable (Suharyadi & Purwanto 2009)

The Profitability Development of Islamic Commercial Banks
This study utilized computer software Eviews 10 as data processing tools to speed up the processing of results that can explain the variables with econometric analysis methods. The results and analysis of the tests that have been carried out as the compared to α. If α is smaller than prob-chi-squared then it is free from the problem of heteroscedasticity. Based on table1 above shows that prob-chi-squared is 0.0795> 0.05, it indicates that it is free from the problem of heteroscedasticity.

Autocorrelation Test
Autocorrelation test aims to test whether in a linear regression model there is a correlation between confounding errors in period t with confounding errors in period t-1 (previously). 6. T test (partial) After carrying out the overall regression coefficient test, the next step is to calculate the regressioncoefficients individually or t test. The t test is used to determine whether or not the influence of each independent variable individually (partial) on the dependent variable is tested at a significant level of 0.05, the independent variable influences the dependent variable. The results of testing hypotheses with the t test are as follows:

Economic Interpretation
The interpretation of the results of this study is as follows: 1 This research is supported by previous research conducted by Dahlan (2015) which showed a coefficient with a negative and significant direction.