Awareness and intention to register halal certification of micro and small-scale food enterprises

Halal

In general terms, halal means permitted, authorized, allowed, lawful, legal, or slick according to Islamic Sharia.¹⁸ As described in the Law of Republic Indonesia No. 33/2014¹⁰ Halal products are those that conform to Islamic Sharia (principles). Carrions, blood, pigs, and/or halal animals (e.g., chicken, cow, goat, etc.) slaughtered in a manner inconsistent with Islamic Sharia are all considered non-halal materials. Furthermore, non-halal materials also include intoxicating plants or drinks, material that is harmful to one's health, and microbes contaminated with non-halal materials. Halal encompasses substances (dzatihi), the nature of the substances, processes, processing areas, processing instruments, product storage, product distribution, and serving.¹⁹ Based on these explanations, this study defines halal as what is permissible for Muslims to eat, drink, and use under Islamic law.

Halal awareness

Awareness is defined as the state of being aware: knowledge and understanding that something is happening.²⁰ According to the definition of halal used in this study and the definition of the word awareness in the dictionary, halal awareness is then conceptualized as a process of being aware of what is allowed for Muslims to eat, drink, and use.

The level of halal awareness is influenced by religious beliefs, exposures, the role of halal certification through the halal logo/label, and health-related reasons.²¹ The gender and marital status of SMEs in Thailand have varying levels of awareness to register halal certification. Halal food certificates are required to increase self-confidence, customer trust, and customer satisfaction, although SMEs in Hat Yai, Thailand are dissatisfied with the poor dissemination of halal hub information.²² Halal transportation and halal warehouses also demonstrate SMEs' level of halal awareness in order to maintain the integrity of halal products stored and shipped.²³

Halal awareness does not belong solely to halal product manufacturers. Non-halal restaurant owners in Manila, Philippines are generally aware of the 12 halal certification standards (raw materials, tools and equipment, facilities, buildings, exterior areas, location, halal documentation, staff characteristics, staff policies, pest controls, management responsibilities, and waste management), and the majority are ‘Willing’ to be halal certified.²⁴

According to our observations, the majority of micro and small-scale food entrepreneurs in West Java purchase raw materials and process them into finished products without storing and shipping. As a result, the scope of halal awareness in this study is limited to the awareness of using halal materials and processing in a halal manner.

Knowledge of halal

In the Merriam-Webster dictionary, knowledge is a fact of knowing something with familiarity gained through experience.²⁵ According to the definition of halal used in this study and the definition of the word knowledge in the dictionary, knowledge of halal is then conceptualized as the process of gaining an understanding of what is permissible for Muslims to eat, drink, and use.

The understanding of halal considers knowledge of the laws relating to halal products described in the Quran and Hadith. In general, all foods are permitted except for those derived from prohibited animals such as pigs, dogs, and carrion, as well as foods and beverages containing alcohol and other toxic or dangerous substances. Slaughter must be carried out in accordance with Sharia, with the intention of doing so in the name of God.² Allah says in the Quran Surah (chapter) 2 (Al Baqarah) ayah (verse) 173 as follows²⁶:

These halal foods are revealed in Law of Republic Indonesia No. 33/2014 concerning halal product guarantees Based on the previously defined scope of halal awareness, knowledge of halal in this study only includes knowledge about halal/non-halal (haram) materials according to the Quran and Hadith, as well as knowledge about the separation of equipment used to process halal/non-halal (haram) materials.

Benefit

Merriam-Webster defines benefit as something that produces good effects or that promotes well-being: advantage.²⁷ In this study, benefits are conceptualized as the food entrepreneur's perception of the effect to be gained by producing halal food or having halal certificates and labels. The benefits of producing halal food include increasing market share and competitiveness,²⁸ business growth,¹¹ or business development.⁷

Procedures

The procedure is defined as a set of steps that must be completed in a specific order.²⁹ In this study, the procedure is conceptualized as the food entrepreneur's perception of the steps that must be taken to obtain a halal certificate and label. Standards for gaining halal certification in Indonesia are explained in Law of Republic Indonesia No. 33/2014 concerning the guarantees of the halal products,¹⁰ whereas in the Philippines it is broken down into 12 standards.²⁴ In this study, food entrepreneurs' perceptions of the procedure for obtaining halal certificates in Indonesia involve the availability of information about the certification process, as well as the fact that the certification process is simple, inexpensive, and quick.

Attitude and intention to register halal certification

In the Merriam-Webster dictionary, attitude is defined as a way of thinking that influences one's behaviour,³⁰ while the intention is the thing that you plan to do or achieve: an aim or purpose.³¹ In this study, attitude is conceptualized as thinking about producing a halal product, while the intention is conceptualized as an act of registering the product to obtain a halal certificate.

According to the Planned Behavior Theory, the intention is determined by three independent factors, i.e., attitude toward behaviour, subjective norm, and perceived behavioural control. Supposing that there is a positive attitude that is supported by people around (as a subjective norm) and there is a perception of ease to perform the behaviour under consideration (as a behavioural control), then an individual's intention to behave will be higher.³²

From an Islamic perspective, every Muslim must have an attitude to like and want to do a good job. In a broader context, attitude means to do good deeds due to Allah (God) loves those who do good as Allah (God) commands in Quran surah (chapter) Al-Baqarah ayah (verse) 195²⁶:

Attitude is also associated with two conditions i.e. good (‘mahmudah’) and bad (‘mazmumah’).³³

Several previous studies show that there is a positive relationship between attitude and intention to buy or choose a product. Consumers' attitudes and perceived prices are the most significant factors influencing consumers' purchase intentions for private labeled food products.³⁴ Attitude is also one of the factors that influence the intention to buy branded content on Webisodes, a branded content strategy that provides hidden communication.³⁵ A positive relationship between attitude and purchase intention toward organic foods has been shown by Yang, et al.³⁶

This study restricts food entrepreneurs' attitudes including a focus on halal issues, a guarantee of selling halal products, halal product attention, and checking to use halal raw materials. Meanwhile, food entrepreneurs' intentions are limited to being responsive to the certification process, attempting to meet halal quality standards, implementing a halal assurance system, and registering halal certification as soon as possible.

Identification of variables

Motivation to obtain halal-certified is significantly influenced by religious understanding and motivation to gain profit.¹⁹ The awareness/intention to get halal certificates is significantly influenced by a motivation to get profit because SME entrepreneurs generally agreed that Halal Food Certification provided benefits.¹⁴ Meanwhile, the procedure for obtaining halal certificates is relatively complex, thereby reducing the intention of SMEs to register halal certification. Meanwhile, Lee and Shin³⁷ found that consumers' awareness of Corporate Social Responsibility (CSR) activities and purchase intentions are positively related. According to the Planned Behavior Theory, the intention is influenced by attitude, while the ease of procedure to obtain halal certificates will affect the intention to register their products to get halal certificates.

Referring to Giyanti and Indriastiningsih,¹⁴ Waluyo,¹⁹ and Lee and Shin,³⁷ and the Planned Behavior Theory,³² this study identifies that the variables are knowledge of halal (KH), perception of benefits (PB), perception of procedures (PP), halal awareness (HA), attitude to produce halal product (AHC) and intention to register a halal certificate. Measurement items of each variable are then compiled from the previous studies.^{10,14,19,21–23,28}

Conceptual model and hypothesis

Referring to Waluyo¹⁹ and Giyanti and Indriastiningsih,¹⁴ this study considers that halal awareness is influenced by knowledge of halal and MSEs perception of benefit on the halal certificate. Referring to the Planned Behavior Theory, the halal awareness and attitude (as a positive attitude) and MSEs' perceptions of ease of procedures (as a behavioural control) will encourage the intention for registering halal certification. The relationship of these variables represents the conceptual model of halal awareness and intention to halal certification (see Figure 1).

Figure 1. Conceptual model of awareness and intention to register halal certification.

As can be seen in Figure 1, halal awareness and intention to register halal certificates involve variables of knowledge of halal, perceptions of benefits, perceptions of procedures, and attitudes. Halal awareness is an independent variable, while knowledge of halal and perceptions of benefits are dependent variables. Furthermore, halal awareness, perception of procedures, and attitude to register halal certification are dependent variables, while the intention to register halal certification is an independent variable.

As can be seen in the conceptual model (Figure 1), the level of halal awareness is influenced by the knowledge of halal which may include MSEs' understanding of the types of non-halal food as mentioned in Law of Republic Indonesia No. 33/2014.¹⁰ Therefore, we hypothesize that:

Halal certificates and halal logos are perceived to have benefits in increasing consumer confidence,²² to use as a promotional tool,¹⁴ and compete with other producers.²² Hence, halal certificates are expected to improve the MSEs performance. Based on this point of view, we hypothesize that:

Halal awareness is measured by awareness of the importance of using halal materials in producing halal products,²⁴ and perceiving the benefits to be gained despite the process is very strict.²²

Consumer awareness of the green concept is a strong predictor of their intention to consume green foods,¹⁷ while customer awareness towards the halal logo fosters purchase intention.¹⁶ Referring to Ambali and Akbar³⁸ and Ngah, et al.²³ the intention considers regulating actions and a sense of responsibility to gain a halal certificate. In this study, halal awareness is expected to influence on intention to register halal certification. Hence, we hypothesize that:

MSE entrepreneurs perceive that the procedure to achieve halal certification is complex due to the lack of information from respondents regarding halal certification procedures.¹⁴ This will negatively influence the intention of producers to register halal certification. In the light of this, we hypothesize that:

A positive relationship between attitude and intention has been shown by Jaafar, et al.,³⁴ Yang, et al.,³⁶ and Rezai, et al.¹⁷ These show that attitude influences intention. Hence, we hypothesize that:

Study design and participants

This study adopts a quantitative method to evaluate the hypothesis, i.e., analyze the data using descriptive statistics. This study has followed the STROBE guidelines/checklist for cross-sectional research.

Initially, 680 micro and small-scale food and beverage entrepreneurs in the West Java MSME community were targeted. However, based on our observations, medium-scale enterprises differ from micro and small enterprises in terms of the entrepreneurs' education and economic status. Medium-scale entrepreneurs have a better education and economy than MSEs. This has an impact on knowledge and understanding of the significance of halal-certified products. Because micro and small-scale entrepreneurs are more profit-driven, regardless of halal or haram, many products on the market are uncertified. Hence, this research focuses on MSEs. Furthermore, we separate the food and beverage enterprises, due to the different halal requirements for raw materials. Finally, the unit of analysis for this research is food MSEs who are members of the MSME group rather than food and beverage MSME.

The respondent criteria are 1) micro and small-scale food entrepreneurs with an annual sales turnover are less than 2,500 Rupiahs and net assets are less than 500 million Rupiahs (see Table 1); 2) have an ongoing business; 3) do not have a halal certificate. A Google Form with a cover letter and a set of questionnaires were sent out to potential respondents. This method was chosen because of the COVID-19 pandemic outbreak. In addition, the designed questionnaires could be collected without conducting direct visits to the respondents. The respondents could not participate in the survey unless they gave their written consent. Data from food entrepreneurs were collected from March to May 2020.

We received written permission from the Chairman of the West Java MSME associations to contact these food entrepreneurs in West Java for data collection. To guarantee that there is no conflict of interest in this study, survey responses are kept anonymous.

Data collection

Data were collected by sending electronically to the respondent standard questionnaires modified from previous studies. The questionnaires were re-translated from English to Indonesian, except for those referring to Waluyo¹⁹ due to already being in Indonesian. A copy of the distributed questionnaires can be found in Extended Data.³⁹

The questionnaire was pretested with a small sample of food MSE entrepreneurs before being distributed to the actual respondents. Based on pretest feedback, the wording of some items was refined and modified to guarantee that the validity and reliability of each variable meet the required standard. The question items were scored on a Likert scale of 1 (strongly disagree) to 5 (strongly agree). The follow-up of this plan is described later in the goodness of measurements instruments session.

The measurement items for the knowledge halal variable were adapted from Giyanti and Indriastiningsih¹⁴ and Waluyo.¹⁹ The survey section includes four items, such as knowledge of; slaughtering methods (KH1), haram products (KH2 and KH3), and processing equipment (KH4).

The measurement items for the perceptions of benefits variable were adapted from Giyanti and Indriastiningsih¹⁴ and Abdul.²² These items asked about respondents' perceptions of the benefits they would get if they had a halal certificate, such as a promotional tool (PB1), more convincing consumers to buy (PB2), improving business performance (PB3), and more competitive (PB4).

The measurement items for the perceptions of the procedure variable were adapted from Giyanti and Indriastiningsih¹⁴ and Ambali and Bakar.²¹ This item asked about the respondent's perception of the procedure for obtaining halal certificates in Indonesia, such as the existence of information about the certification process (PP1), the certification process is easy (PP2), cheap (PP3), and fast (PP4).

The measurement items for the halal awareness variable were adapted from Abdul²² and Law of Republic Indonesia No 33/2014.¹⁰ This part of the survey asked about the awareness of respondents about the importance of producing halal food (HA1), using halal raw materials (HA2), the importance of having a halal certificate (HA3), and the rigorous of the halal certification process (HA4).

The attitude variable measurement items to produce halal products were adapted from Ambali and Bakar²¹ and Menteri Hukum dan HAM.¹⁰ These items include respondents' attitudes to always pay attention to halal issues (AHC1), ensure consumers buy halal products (AHC2), pay attention to halal products (AHC3), and use halal materials (AHC4).

The measurement items for the variable of intention to register halal certification were adapted from Ngah, et al.,²³ Abdul, et al.,²⁸ and Law of Republic Indonesia No 33/2014.¹⁰ These items include respondents' intention to be responsive to the certification process (IHC1), strive to meet halal quality standards (IHC2), immediately implement halal assurance system (IHC3), and immediately register halal certification (IHC4). The variables, indicators, and measurement items are described in Table 2.

We analyzed the chi-square of early and late respondents' responses to see if there was any potential for non-response bias (the first and last 20 percent of responses received). The findings show that there is no significant variation in responses on key metrics between early and late respondents.

Structural model analysis

Data are analyzed with descriptive statistics to provide a description of the respondents' profile, the results of the assessment of the level of knowledge of halal, perceptions of benefits, halal awareness, perceptions of procedure, attitude, and intention to register halal certificates. The research analysis is intended to assess the model and to objectively describe the hypotheses.

The adopted theoretical models are evaluated using Structural Equation Model-Partial Least Square (SEM-PLS) method because this study is exploratory research to predict certain constructs by focusing on explaining the variance in the dependent variables when examining the model.⁴¹ Free Smart-PLS software 3.3.2. is chosen as data processing.

The goodness of the measurement instrument

In this study, both validity and reliability tests are carried out to measure the goodness of the shared questionnaires. Validity is a test of how well the developed instrument measures the particular construct being measured, while reliability is a test of how the developed instrument consistently measures the construct being measured.⁴²

Initially, the questionnaires had been planned to be pretested in a small sample of food MSEs by distributing it directly beginning in March 2020. However, we were unable to meet with the entrepreneurs due to the social distancing caused by the COVID-19 outbreak. Finally, we decided to distribute the electronic questionnaire Google Forms in May 2020. As a result, the data collected reached 100 respondents in just a matter of days. Due to the limitations of the software features used, the distribution of the questionnaire was halted. As a result, all collected data was subjected to validity and reliability tests.

Measure for validity

In this study, measuring validity uses construct, convergent and discriminant validity to check how well the questionnaire measures the constructs that fit with the adopted theory.

The construct validity is assessed by looking at loading and cross-loading to identify problem items if there are any. The validity test using cross-loading is patterned that the main loading factor originating from its construct is greater than the correlation value built from these variables on other constructs.⁴³ Table 3 presents an evaluation of validity based on the value of the main loading factor to the value of cross-loading factors with other constructs. As shown in Table 3, the value of the main loading factor of each construct is higher than the value of the loading factor outside of the main loading factor, so it can be concluded that all constructs are declared valid. For example, the loading factor of AHC1 is higher than the loading factor of HA, IHC, KH, PB, and PP.

Convergence validity is evaluated by comparing loading factor with both Composite Reliability (CR) and Average Variance Extracted (AVE).^41,43 The acceptance level for loading factors is more than 0.5, while the acceptance level for CR is more than 0.70, and the AVE value of 0.50 or higher. Table 4 shows that all items’ loadings exceed 0,5, while all CR values are higher than 0.7. In this study, the AVEs for the indicators are within the range of 0.736 and 0.854 respectively (Table 4). Hence, the questionnaire fulfills the requirements for convergent validity. Based on Table 4 it can be concluded that all constructs have p-values smaller than 5% as suggested by Budhiasa,⁴³ so it can be stated that all constructs are valid.

The square root of the AVE of each construct should be greater than its highest correlation with any other construct, according to the Fornell-Larcker criterion.⁴¹ Furthermore, the outer loadings of an indicator on a construct should be greater than all of its cross-loadings with other constructs. Table 5 shows that the average variance extracted by the indicators measuring that construct is less than the squared correlations for that construct. To put it another way, the measurement model represents adequate convergent and discriminant validity.

Measure for Reliability

The Reliability test is evaluated by the Alpha Cronbach value, the most widely used test. The Alpha Cronbach value higher than 0.6 is acceptable in exploratory research.⁴¹ As shown in Table 6, the Alpha Cronbach’s are within the range of 0.878 and 0.943, hence it confirms the reliability of the instrument.

Ethical consideration

The Ethical Licensing Committee of the Islamic University of Bandung approved this study by Protocol number: 495/B.04/Bak-k/XII/2019. We had provided all respondents with a consent statement after consultation. The written consent to participate from the Chairman of the West Java MSME Community was gained according to document number: 015/SKIP/IV/2020. In the questionnaire, there is a statement that by filling out the questionnaire the respondents gave their consent to participate. Respondents gave their consent to take part when they filled out the questionnaire. Respondents had given their consent truly and without coercion. Furthermore, to protect respondents' rights and privacy, all forms of data obtained will be kept confidential.

Structural analysis

Barclay, Higgins, and Thompson (1995) in Hair et al.⁴¹ explain the Ten Times Rule in determining the number of PLS-SEM samples, which states that the sample size must be greater than (1) ten times the greatest number of formative indicators used to measure a single construct, or (2) ten times the greatest number of structural paths directed at a specific construct in the structural model. In other words, the minimum sample size is equal to 10 times the maximum number of arrows in the PLS path model pointing to the latent variable.⁴¹

In this study, the IHC variable is the latent variable with the maximum number of arrows, i.e., 3 (see Figure 1). As a result of the Ten Times Rule, 3.10 = 30 represents the bare minimum of observations required to estimate the PLS path model depicted in Figure 1. In terms of Cohen's (1992) recommendation for multiple OLS regression analysis, or running a power analysis using the G*Power program, as cited in Hair, et al.,⁴¹ 33 observations are required to detect an R² value of about 0.25, assuming a statistical power of 80% and significance level of 5%.

Participants

The questionnaires were distributed electronically to the West Java MSME community. The questionnaires were returned by 376 people. The returned questionnaires were then sorted using predetermined criteria, yielding 137 questionnaires that met the criteria. However, due to the limitations of the software features used, this study only processed 100 questionnaires at random.

Table 7 displays the percentage of respondents for each indicator. As shown in Table 7, 98% of respondents have Islam as their religion (Muslim), 71% are female, and 88% are 26 years old or older. In terms of business size, 89% of respondents are micro-scale entrepreneurs.

Descriptive statistics of the research variables

Table 8 shows the descriptive statistics for each measurement indicator. The knowledge of halal (KH) has a high average perception value.

Hypothesis testing

Figure 2 shows the path analysis result of halal awareness and the intention to register halal certification using free Smart PLS 3.3.2. software, while Table 9 represents the hypothesis testing results of each path.

Figure 2. Result of path analysis.

In this section, the path analysis is addressed to ascertain the hypotheses put forward. As can be seen in Figure 2, the R² value of 0.797 for IHC indicates that 79.7% of the variance in IHC can be explained by HA, PP, AHC. In addition, Figure 2 also shows that HA, PP, and AHC are positively related to IHC among MSEs entrepreneurs with β = 0.699, 0.042, and 0.2, respectively. According to the t-value of the path coefficients, HA has a significant impact on IHC, while AHC and PP do not have a significant impact on IHC.

Besides, the R² value of 0.826 for HA means that 82,6% of the variance in HA is influenced by KH and PB, with values β = 0,292 and 0,683 respectively. Hence, KH and PB have a strong and significant impact on the awareness of MSE entrepreneurs about the importance of halal products. According to Hair, et al.⁴¹ R² values of 0.75, 0.50, or 0.25 for the endogenous construct, respectively, can be described as substantial, moderate, or weak. The R² value of an endogenous latent variable (i.e., halal awareness) described by the two predictive constructs in this study is 82.6% (see Figure 2), which is substantial. Hence, KH and PB are genuine predictors of MSEs awareness to produce a halal product. The same goes for the R² value of the endogenous latent variable (i.e., Intention to register halal certification) is 79,7% which is substantial. However, the genuine predictor of MSEs Intention to register halal certification is only HA.

Underlying data

Figshare: Dataset of Questionnaire Result from the respondents of Awareness to Register Halal Certification https://doi.org/10.6084/m9.figshare.17078381.v1.⁴⁵

This project includes the following underlying data:

Data are available under the terms of the Creative Commons Attribution 4.0 International license (CC-BY 4.0).

Extended data

Figshare: List of questions of descriptions of the questionnaire - Awareness to Register Halal Certification. https://doi.org/10.6084/m9.figshare.17078336.v1.³⁹

This project includes the following extended data:

Data are available under the terms of the Creative Commons Attribution 4.0 International license (CC-BY 4.0).

Figshare: The Respondent characteristics of Awareness to Register Halal Certification. https://doi.org/10.6084/m9.figshare.17078354.v1.⁴⁶

This project includes the following extended data:

Data are available under the terms of the Creative Commons Attribution 4.0 International license (CC-BY 4.0).