Determinants of intention to use Ar-Rahnu among muslim micro-entrepreneurs in Perak during Covid-19 pandemic : the adaption of theory of reasoned action

Abstract

The small and medium enterprises (SMEs) continue to be the key driver of the Malaysian economy. Interestingly, micro-entrepreneurs account for the majority of SME (76.24 percent). However, they continue to face barriers to financing due to a variety of factors, such as the absence of a business track record, a weak credit rating, a lack of collateral, and inadequate documentation. In fact, formal financial institutions typically take a longer period of time to disburse loans or financing and they charge a somewhat high borrowing cost as well as significant legal documentation fees. It has been discovered that obstacles to obtaining funding from commercial banks demotivate micro entrepreneurs. Thus, Ar-Rahnu is one of the potential sources of funding for micro entrepreneurs. Hence, the purpose of this study is to elucidate the effects of attitude, subjective norms, perceived risks and perceived financial benefits on intention to use ArRahnu scheme during COVID-19 pandemic. The quantitative method has been chosen to analyze the intention among micro scheme entrepreneurs in the State Perak. All data collected is determined by using questions researched and analyzed using SPSS (Statistical Package for Social Sciences) version 26.0. A total of 190 respondents were involved in this study. The Theory of Reasoned Action (TRA) was adopted as the underpinning theory in the development of theoretical framework of this study. The findings of this study revealed that attitude, subjective norms and perceived financial benefits have significant influence on the intention to use Ar-Rahnu scheme among Muslim micro-entrepreneurs in Perak, with perceived financial benefits as the most influential variable followed by subjective norms and attitude. The independent variables explained 70.4 percent of the variance on intention to use Ar-Rahnu scheme. This study provides new insights in term of empirical evidence on TRA framework by adding perceived risks and perceived financial benefits as the new variables. Practically, the research findings could be a beneficial guideline for the financial institutions generally on the factors that affect the intention to use Ar-Rahnu scheme. These findings lead to the enhancement of Ar-Rahnu promotion and increasing the availability of Ar-Rahnu scheme. Future research is recommended to consider a longitudinal design for better information enrichment.