Volume 7, Issue 12, December – 2022 International Journal of Innovative Science and Research Technology

ISSN No:-2456-2165

Islamic Financial Literacy and Inclusion on Personal

Finance Behavior with Socio-Demography as a
Moderating Variable
Rifa'atul Maftuhah 1
Triani Ratnawuri 2
Grisvia Agustin 3
Nasikh 3
Economic Education
Faculty of Economics and Business
State University of Malang, Indonesia

Abstract:- The development of the Indonesian Islamic I. INTRODUCTION

finance industry in the past decade has shown a positive
increase. The positive achievements of the Indonesian According to the Organization for Economic Co-
Islamic finance industry can be seen from several aspects, operation and Development (OECD), financial literacy is a
namely institutional aspects and supporting combination of awareness, knowledge, skills, attitudes and
infrastructure, regulatory aspects, monitoring system behaviors needed to make sound financial decisions and
aspects, awareness aspects and aspects of the level of ultimately achieve individual financial well-being (INFE,
public literacy towards their services (Alanshori, 2016). 2011). Financial literacy is the ability to understand and use
Indonesia is a developing country and is trying to expand information related to finance (Huston, 2010; Lusardi &
its financial inclusion. This is an effort to remove all forms Mitchell, 2014).
of barriers to public access in utilizing financial services.
One of the factors influencing the success of financial The development of the Indonesian Islamic finance
inclusion is the level of public financial literacy. The industry in the past decade has shown a positive increase. The
purpose of this study was to find out 1) How does Islamic positive achievements of the Indonesian Islamic finance
financial literacy affect personal finance behavior , 2) How industry can be seen from several aspects, namely
does Islamic financial inclusion affect Personal Finance institutional aspects and supporting infrastructure, regulatory
Behavior, 3) How does Islamic financial literacy affect aspects, monitoring system aspects, awareness aspects and
personal finance behavior with sociodemography as a aspects of the level of public literacy towards their services
moderating variable, 4) How does Islamic financial (Alanshori, 2016).
inclusion affect personal finance behavior with
sociodemography as a moderating variable. The research Fig 1 National Survey
used quantitative methods by distributing online National Year 2016 2019 year
questionnaires through social media so that 345 Financial Index 2013 year
respondents were obtained using Smart PLS data analysis. Islamic Financial 21.84% 29.7% 38.03%
the results of this study 1) Islamic financial literacy (X1) Literacy
has a positive effect on Personal Finance Behavior (Y), Islamic Financial 59.74% 67.8% 76.19%
with a path coefficient value = 0.618, and significant, with Inclusion
a P-Value <0.001 , 2) Islamic financial inclusion (X2) has Source: OJK, 2019.
a positive effect on Personal Finance Behavior (Y), with a
path coefficient value = 0.301, and is significant, with a P- The 2019 National Financial Literacy and Inclusion
Value <0.001, which means <0.05. 3) Islamic financial Survey (SNLIK) showed a Financial Literacy Index of
literacy has an effect on personal finance behavior with 38.03% and a Financial Literacy Index of 76.19%. This
sociodemographics having no effect as a moderating suggests that although financial literacy is an important skill
variable, in this case the sociodemographic value is 0.087 in the context of community empowerment, personal well-
> 0.05, so it is not significant 4) Islamic financial inclusion being, consumer protection, etc., Indonesians generally do
has an effect on personal finance behavior with not fully understand the characteristics of the various
sociodemographics mediating no effect of P Value 0.024 financial products and services offered. indicates that you do
<0.05. not understand We promote financial inclusion through
formal financial services institutions.
Keywords:- Islamic Financial Literacy, Islamic Financial
Inclusion, Personal Finance Behavior , Sociodemography

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Volume 7, Issue 12, December – 2022 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
The development of the financial sector and services is Hypothesis 2 : Sharia Financial Inclusion influences personal
important for economic growth and poverty alleviation finance behavior
(Levine, 2005). The increasing variety of financial products Islamic financial literacy and Islamic financial inclusion
and services as well as global economic instability has led to are important things to know about understanding or
an increase in the complexity of financial decisions and has knowledge of Islamic finance and facilitating Islamic bank
also caused society to be faced with challenges in the product services to the public so that they feel comfortable,
economic and financial fields. Financial literacy helps informative and timely in terms of planning individual
economic development in dealing with economic complexity financial management which can be strengthened by
and instability. Financial well-being and financial literacy are sociodemographics. Sociodemography is everything that is
two important factors in determining an individual's quality pleasing to the community, there are several characteristics,
of life (Mahdzan & Saleh, 2013). However, research shows namely age, gender, education, employment, and income. In
that the financial literacy of people in the world, especially in this case, sociodemography can strengthen the influence of
developing countries, is still lacking and this becomes an Islamic financial literacy on personal finance. This is in
obstacle because they are unable to deal with financial accordance with research results (Bushan & Medury, 2013 ;
complexity and are unable to make the best decisions as Yusnita & Abdi, 2018) .
needed because they do not have adequate information
(Remund, 2010). Hypothesis 3 : Islamic financial literacy has an effect on
personal finance behavior with sociodemography as a
Indonesia is a developing country and is trying to moderating variable
expand its financial inclusion. This is an effort to remove all Hypothesis 4 : Islamic financial inclusion has an effect on
forms of barriers to public access in utilizing financial personal finance behavior with sociodemography as a
services. One of the factors influencing the success of moderating variable.
financial inclusion is the level of public financial literacy.
Financial literacy or literacy shows the ability or level of II. METHOD
public understanding of how money works (Amiruddin,
2017). This study uses a quantitative method. Data collection
was carried out through an online survey using a closed
Financial inclusion is the availability of access to questionnaire. Responses about the variables used such as
various institutions, products and services according to the literacy, Islamic financial inclusion, personal finance
needs and capabilities of the community in order to improve behavior and sociodemographics were collected from a
people's welfare. This availability is not only from access that sample of 345 respondents.
can be utilized but also the availability of financial products
and services that suit the needs of the community. The The questionnaire consists of 29 which cover all
suitability of these financial products and services can variables, such as literacy variables (20), Islamic financial
provide greater benefits to society and can be used optimally inclusion (9), personal finance (10) and sociodemographics
((OJK), 2016). (5). All items were measured with a 5 Likert scale ranging
from strongly agree, agree, neutral, disagree and strongly
Financial literacy as a combination of awareness, disagree. All items are valid and reliable because the value of
knowledge, skills, attitudes, and behaviors that are important the validity test shows r table above 0.361 and Cronbach's
in making personal financial decisions which ultimately leads alpha in the statistical reliability table above 0.600. Data were
to achieving financial well-being (Bhabha et al, 2014). analyzed using SEM PLS (Hair, 2014; Sholihin & Ratmono,
Financial literacy can be conceptualized in two dimensions, 2013). The analysis includes descriptive statistics such as
namely the understanding dimension (knowledge of personal frequency and percentage to present the main characteristics
finance) and the usage dimension (implementation of of the respondents.
personal finance concepts and products). Financial literacy is
divided into four categories, namely the basics of personal III. RESULT AND DISCUSSION
finance, loans, savings and investments and protection of
resources (Lestari et al, 2022). There is a lot of research on 1) Outer Model Evaluation ( Measurement Model ) :
Islamic financial literacy that influences personal finance Validity and Reliability Testing
(Lestari et al, 2022; Remund, 2010). Convergence validity is part of the measurement model,
commonly referred to as the extrinsic model in SEM-PLS, but
Hypothesis 1 : Islamic Financial Literacy influences personal as confirmatory factor analysis (CFA) in covariance-based
finance behavior SEM (Sholihin & Ratmono, 2013). There are two criteria for
Financial inclusion is the provision of access to financial assessing whether the external model (measured model)
services to all residents, especially the poor and other smallest meets the convergence validity requirement of the reflecting
populations (Ozili, 2018). Everyone has the right to get access structure. 2014). However, in some cases, especially for
and full services from financial institutions in a convenient, newly developed surveys, load requirements above 0.7 are
informative, affordable and timely manner, without often not met. Therefore, strains between 0.40 and 0.70
discrimination and fully upholding their dignity. These should be considered for conservation (Sholihin & Ratmono,
services are provided to mostly disadvantaged and low- 2013). The following suggestions are made by (Hair, 2014)
income groups. in deciding whether to keep or remove reflex indicators.

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Volume 7, Issue 12, December – 2022 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165

X1.12 0.834
X1.13 0.822
X1.14 0837
X1.15 0.81
X1.16 0.804
X1.17 0.82
X1.18 0.831
X1.19 0.81
X1.20 0.817
X2.1 0.838
X2.2 0837
X2.3 0.818
X2.4 0.841
X2.5 0.827 0.693 0.953
X2.6 0.832
X2.7 0.84
X2.8 0.842
X2.9 0.819
Fig 1 Reflective Indicator Analysis Procedure
Y1 0.835
Any metric with a load less than 0.40 should be removed Y2 0.848
from the model. However, for indicators with loadings Y3 0.846
between 0.40 and 0.70, we need to analyze the impact of the Y4 0.84
decision to remove these indicators on average sampling
variance (AVE) and combined reliability. Measures with Y5 0.844
0.712 0.961
loads between 0.40 and 0.70 can be removed if they can Y6 0.854
increase the average sample variance (AVE) and combined Y7 0.855
reliability above that threshold (Mahfud and Ratmono, 2013).
Y8 0.824
The AVE cutoff is 0.50 and the combined reliability is 0.7.
Another consideration when removing indicators is the effect Y9 0.846
on the validity of the content of the constituent. Indicators Y10 0.848
with low loading may be retained as they contribute to the Z1 1 1 1
effectiveness of the component content (Sholihin &
Ratmono, 2013). Z2 1 1 1
Z3 1 1 1
Table 1 Validity Testing based on Factor Loading and Z4 1 1 1
Average Variance Extracted (AVE) and Reliability Testing
based on Composite Reliability (CR) Z5 1 1 1
Average Construct
Variance Reliability Checking the plausibility of the stress coefficients in
loading Extracted(AVE) (CR) Table 1, all stress values are > 0.7, meaning that they meet
the plausibility requirement based on the stress values. In
X1.1 0821 addition, validity tests based on mean variance sampled
X1.2 0811 values (AVE) and reliability tests based on combined
X1.3 0.819 reliability (CR) were performed. Additionally, a plausibility
check was performed using the AVE value approach. The
X1.4 0.844 recommended AVE value is 0.5 or higher (Sholihin &
X1.5 0.83 Ratmono, 2013). All AVE values were found to be > 0.5,
X1.6 0821 0.679 0.975 meaning they meet the validity requirements based on AVE.
In addition, a validity check is performed using the CR value
X1.7 0.824
approach. The recommended CR value is 0.7 or higher
X1.8 0.812 (Mahfud and Ratmono, 2013). All CR values were found to
X1.9 0837 be > 0.7, meaning they meet the reliability requirements
X1.10 0.831 based on CR. In addition, discriminant validity checks were
performed using the Fornell-Larcker approach. Table 2
X1.11 0837 shows the results of the discriminant validity test.

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Table 2 Discriminant Validity Testing Table 3. Significance effect test results
Varia Z Z Path R-
bles X1 X2 Y Z1 Z2 Z3 4 5 Path Coefficient P-Value Square
(0.8 X1 -> Y 0.618 <0.001
X1 24)
X2 -> Y 0.301 <0.001
0.18 (0.8
X2 2 33) X1*Z1 -> Y -0.107 0.236
0.45 0.42 (0.8 X1*Z2 -> Y 0.134 0.087
Y 8 7 44) X1*Z3 -> Y 0.192 0.071
0.18 0.16 0.00
Z1 4 2 4 (1) X1*Z4 -> Y 0.086 0.202
0.45
- - X1*Z5 -> Y 0.027 0.414
0.05 0.01 0.06 0.1 X2*Z1 -> Y 0.293 0.024
Z2 3 6 6 73 (1)
X2*Z2 -> Y 0.14 0.102
-
0.07 0.11 0.10 0.1 0.1 X2*Z3 -> Y 0.14 0.097
Z3 4 2 4 09 3 (1) X2*Z4 -> Y -0.002 0.495
- X2*Z5 -> Y -0.076 0.244
0.19 0.15 0.00 0.2 0.0 0.1 (1
Z4 9 6 9 08 7 55 )
- (
0.22 0.27 0.21 0.0 0.0 0.0 0. 1
Z5 3 1 3 37 61 49 02 )
Note: The value between "( )" is the AVE Square Root

In testing discriminant validity, the AVE square root

value of a latent variable is compared with the correlation
value between that latent variable and other latent variables.
It is known that the AVE square root value for each latent
variable is greater than the correlation value between the
latent variable and other latent variables. So it is concluded
that it meets the requirements of discriminant validity.

2. Model Fit Test ( Goodness of Fit )

Figure 4.3 presents the results of the WarpPLS for the
goodness of fit test .

Fig 2 Path Coefficient and P-Value

Based on table 3 and figure 2 regarding the variable

significance test to answer the research hypothesis as follows:
Fig 4.3 Model Fit Test (Goodness of Fit)
1) Financial Literacy influences Behavioral personal
Based on Figure 4.3, it is known that the probability finance
values ( p-values ) of APC and ARS are significant, namely Islamic financial literacy (X1) has a positive effect on
P < 0.001 which means < 0.05 and P < 0.001 which means < Personal Finance Behavior (Y), with a path coefficient value
0.05, and the AVIF value = 2.254 is less than 5. This means = 0.618, and is significant, with a P-Value <0.001, which
that the proposed model is fit. means <0.05. Financial literacy is an individual's
understanding of having broad insight and knowledge of
3. Significance of Influence Test understanding financial management and regulation
Table 3 presents the results of the path coefficient and individually and in organizations and or in the business
the significance test of the direct effect. While Figure 1 is sector. In this case financial literacy has a significant effect
presented the value of the path coefficient along with the p- on personal finance behavior of 0.618, which underlies
value . significantly from the results of Islamic financial literacy
research on the indicator of basic knowledge of Islamic
finance getting a high score of 0.844, it can be concluded that
the response already understands the benefits of basic
knowledge of Islamic finance and products and sharia

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Volume 7, Issue 12, December – 2022 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
financial services, including features, benefits and risks, with research conducted by (Tsalitsa & Rachmansyah, 2016)
rights and obligations related to sharia financial products and which states that financial behavior has a positive effect on
services, as well as having skills in using sharia financial financial inclusion, reinforced by research (mahdzan &
products and services. Tabiani, 2013 : Huston, 2010). steps taken by sharia banks to
make it easier for people to access sharia banking, namely
Islamic financial literacy is expected to be able to increasing attractive features for the whole community,
encourage an increase in the use of financial products and educating and outreach to the public so that people are literate
services that are in line with the needs of the Muslim about sharia banking, increasing the human resources of
community in particular and Indonesian society in general. sharia banks and support from the government and OJK in
sharia which encourages increased utilization of financial the form of financial assistance such as BUMN in general.
products and services that are in line with the needs of the
Muslim community in particular and the Indonesian 3) Financial Literacy affects Personal Finance Behavior
community in general. this will motivate the industry in the with sociodemographics as a moderating variable
Islamic financial services sector in accordance with the ever- Financial literacy has an effect on personal finance
developing needs of society. Before explaining the strategy behavior with sociodemography having no effect as a
for developing Islamic financial literacy, it is better to first moderating variable, in this case the sociodemographic value
explain the meaning, goals and benefits of financial literacy, is 0.087 > 0.05, meaning it is not significant. So that Islamic
including the vision and mission of the national financial financial literacy has an effect on personal finance behavior
literacy movement carried out by the financial services but sociodemography does not mediate these variables, which
authority. is in accordance with the results of research from (Bushan &
Medury, 2013). Whereas sociodemographic Islamic financial
Good personal financial management is important literacy has no effect, because these indicators have no effect
because it can determine short-term and long-term life on the respondent's understanding of Islamic financial
(Farrell et al. 2015). Personal financial management is a form literacy on a person's financial behavior because this is not
of intelligence in managing personal financial assets. Good influenced by age, gender, level of education and one's
financial planning needs to be balanced with the realization income.
or implementation to achieve the planned goals. Financial
behavior is formed from childhood to adulthood. Financial Someone who is financially literate is someone who has
education at an early age determines a person's financial some basic knowledge of financial concepts. So that if
behavior (Montoya and Soledad 201 (Farrell, L, & Risse, someone has basic knowledge of financial concepts he will
2015). be considered literate in financial terms, with this much and
extensive knowledge of finance, someone will behave
Financial behavior is considered as the most important financially better because he knows what to do to achieve his
element of financial literacy (Organization for Economic Co- financial goals and short-term financial plans. nor length
operation and Development (OECD), 2012). Financial (Organization for Economic Co-operation and Development
behavior is formed from childhood to adulthood. Financial (OECD), 2012).
education at an early age determines a person's financial
behavior (Montoya and Soledad, 2017). Bulte, Lensink, and 4) Islamic financial inclusion has an effect on personal
Sayinzoga (2016) also stated that financial literacy is an finance behavior with sociodemographics as a
important determinant factor in the formation of financial moderating variable
behavior , especially in developing countries because Islamic financial inclusion has an effect on personal
financial training and other financial support activities will finance behavior with no sociodemographic effect of P Value
increase financial knowledge and will ultimately affect 0.024 <0.05. This shows that a person's Islamic financial
financial behavior . (Bulte et al. 2016). inclusion influences a person's personal finance bahavior but
sociodemographics do not mediate respondents, in the sense
2) Islamic Financial Inclusion affects personal finance that respondents' access to Islamic finance is not mediated by
Behavior a person's gender, education, income and age.
Islamic financial inclusion (X2) has a positive effect on
Personal Finance Behavior (Y), with a path coefficient value Islamic financial inclusion means that someone who
= 0.301, and is significant, with a P-Value <0.001, which treats, manages and uses his financial situation well will
means <0.05. Based on this, a person's Islamic financial understand that Islamic financial institutions or Islamic
inclusion is influenced by personal finance behavior, because banking is one of the most appropriate places, because
someone who treats, manages, and uses his financial Islamic banking can treat the owner's finances well, can be
condition properly will understand that Islamic financial channeled back and will get results in the form of profit
institutions or Islamic banking is one of the most appropriate sharing for those who have excess funds with those who need
places, because Islamic banking can treat finance owners funds. So that someone's behavior can reflect someone's
properly, can be redistributed and will get results in the form understanding of the importance of an Islamic financial
of profit sharing for those who have excess funds with those institution in managing their money. This is in line with
who need funds. So that someone's behavior can reflect research conducted by (Farrell, L, & Risse, 2015).
someone's understanding of the importance of an Islamic
financial institution in managing their money. This is in line

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Volume 7, Issue 12, December – 2022 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
IV. CONCLUSION Complex Economy. Journal of Consumer Affair , 276-
295.
 Based on the results of research that has been done as [12]. Amiruddin, SS (2017). Islamic Financial Literacy in
follows: Islamic Religious Colleges (Case Study of UIN Alaudin
1. Islamic financial literacy (X1) has a positive effect on Makassar). Al Ulum , 44-64.
Personal Finance Behavior (Y), with a path coefficient [13]. (OJK), OJ (2016). Increasing Financial Literacy and
value = 0.618, and is significant, with a P-Value <0.001
Inclusion in the Financial Services Sector for
2. Islamic financial inclusion (X2) has a positive effect on
Personal Finance Behavior (Y), with a path coefficient Consumers and/or the public. Jakarta: Financial
value = 0.301, and is significant, with a P-Value <0.001, Services Authority.
which means <0.05. [14]. Bhabha, JI, Khan, S., Qureshi, AQ, Naeem, A., & Khan,
3. Islamic financial literacy has an effect on personal finance I. (2014). Impact of Financial Literacy on Saving
behavior with sociodemographics having no effect as a Investment Behavior of working women in the
moderating variable, in this case the sociodemographic Developing Countries. Research Journal of Finance
value is 0.087 > 0.05, so it is not significant
and Accounting , 118-122.
4. Islamic financial inclusion has an effect on personal
finance behavior with sociodemographics mediating no [15]. Lestari, E., Setyawati, Y., & Sarjo, S. (2022). The effect
effect of P Value 0.024 <0.05. of the level of financial literacy on personal finance in
students of the Faculty of Economics, Tribhuwana
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