Factors Affecting Customer Intentions to Seek Islamic Microfinancing: Evidence from Indonesia

Abstract—Micro, small, and medium-sized enterprises (MSMEs) contribute significantly to global GDP and employment, especially in developing economies like Indonesia. Unfortunately, MSMEs have little access to formal sources of external finance. The rise of Islamic microfinance potentially can overcome this constraint. This study analyzes five factors that determine MSMEs' intention to seek Islamic microfinance as a source of business financing. Drawing upon the Theory of Planned Behavior, we sample 160 customers from four branches of two Islamic microfinance institutions in Indonesia. Using partial least squares structural equation modeling, we measured the influences of five variables on their microfinancing intentions: attitude, subjective norms, perceived behavioral control, pricing, and religiosity. Results show that attitude, subjective norms, perceived behavioral control, and religiosity influence intention to seek Islamic microfinance. Pricing had a negative effect. These results help Islamic financial institutions to improve attract clients and design strategies to expand markets. Keywords— Islamic microfinance, theory of planned behavior, religious factor, pricing factor, intention to use, MSMEs, Islamic microfinance institutions