SMEs Owners’ Perception and Choices on Islamic MFIs and Conventional MFIs in Rural Area to Improve Financing Acess in Facing the Single Market of ASEAN Economic Community 2015

This research is conducted to determine the factors that influence perception and choices of SMEs in the rural area, such as Sidoarjo, in choosing their financing resources, whether it comes from conventional MFIs or Islamic MFIs (IMFIs). We conduct in-depth interview and questionnaires to gather the data from SMEs owners. Then we use the stepwise discriminant analysis with Wilks' Lambda method to determine several factors which significantly have discriminating power in differentiating the two groups. The dependent variable is the perception and choices of SMEs in choosing their financing resources, which is divided into two groups: the group of SMEs who chose IMFIs and those who chose conventional MFIs. Using F value as criteria to accept or reject the hypothesis and with alpha 5%, there are three factors which significantly have discriminating power: variety of financing product, references and promotion, and knowledge and information about IMFIs. All of them are the factors that must become the concern if a party wants to develop a certain kind of micro finance institutions in Sidoarjo. References and promotion factor has the biggest discriminating power of all. This indicates the lack of promotion and education activities of IMFIs to the public about Islamic economic with its profit sharing system. As the result, some of the SMEs apply for credit to conventional MFIs with high interest rates, while some of them would rather use their own money as capital and do not apply for credit to any financial institutions. IMFIs in Sidoarjo can be developed in the future and could be an alternative financing source for the development of SMEs. SMEs owners states that they are interested with IMFIs and need more information about them. Therefore, IMFIs of Sidoarjo should be active in socialize the syariah economic system to the public continuously