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Journal of Econom ic and Adm inistrative Sciences Comparing What Drives Financial Behavior of Moslem- Debtor vs Debt-Free Groups in Pandemic Journal: Journal of Economic and Administrative Sciences Manuscript ID JEAS-08-2021-0165 Manuscript Type: Research Paper Keywords: Financial behavior, Islamic Financial Literacy, Financial attitude, Path Analysis Journal of Economic and Administrative Sciences Journal of Econom ic and Adm inistrative Sciences1 Comparing What Drives Financial Behavior of Moslem- Debtor vs Debt- Free Groups in Pandemic Abstract Islam recognizes debt as instrument for consumption smoothing, via Qardhul Hassan and other redistribution instruments. As pandemic sets difficulties to all, particularly to middle-low income Moslem group, some must survive using government financial relieves and debts while others are still able to maintain its financial situation out of debt. This paper aims to study this two groups and examine what makes up their financial decision and how the relationship is the primary interest of the paper. The findings emphasis the efficacy of literacy in determining financial behavior of debtor group, and relationship of literacy on attitude and financial inclusion as intervening variables towards behavior of debt-free group. For debtor group, it is less rationale than the debt-free group. Therefore, although literacy is siginificant and positive, it could not fence them from the prey of private and institutional lenders, particularly during a difficult financial situation like pandemic crisis. Debtor group believes on seeing others who they considered as the group, more than information and knowledge. Attitude is the main determinant for debtor’s behavior. Hence it emphasizes on the importance of a intergrated psychological and financial literacy programs in order to make paradigm shift. Policy recommendation is provided. Key words: Financial Behavior, Islamic Financial Literacy, Financial Attitude, Path Analysis 1. Introduction Theoretically, religiousity is the anchor for individual behavior (Mathras et al., 2016; Shohib, 2020). Values and teachings based on Holy scriptures is the main driver influencing one’s decision for believers (Hackett & Grim, 2012). For faithful individual, religion provides all means and reasons for every decisions (Davies, Douglas J.; Thate, 2017). In spark of behavioral finance, religious individual behavior could not be compared with non-religious group, thus that their decision in the same situation would likely to be different. As the cornerstone, thus, religion is an effective institution to influence one’s financial behavior in good and bad periods (Mirakhor, 2009). In terms of financial difficulties, Islam is opposed to taking interest-rate bearing debt (El-Hawary et al., 2007). According to The Qur’an, Islamic does not nullify debt as financial tools. In fact, Islam recognizes debt as instrument for consumption smoothing, particularly during calamities. The debt is called Qardhul Hassan, however, must be interest-free and creditors could not ask for collateral or repayment (although debtors are still obliged to repay) (Mirakhor, 2012). In this junction, interest-rate bearing debt is prohibited in any form (of neither deferred or cashpayment). It is because interest-rate is a counterpose Page 1 of 18 Journal of Economic and Administrative Sciences 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Journal of Econom ic and Adm inistrative Sciences2 towards social and economic development –i.e. it is a source for income disparity and costs to inclusion. As to opposing interest-rate, Islam endorses instruments based on risk-sharing behavior as an effective tool to manage one’s financial duress (M. U. Chapra, 2006; Mohammed & Hasan, 2008; Mirakhor & Smolo, 2011; Othman & Mirakhor, 2013). Thus, from an Islamic point of view, pandemic crisis could not be a reason of a muslim to be entangled with debt. Pandemic crisis sets many challenges to the economy, including depriving income and consumption level. In developing world, debt trap has become a real issue for majority as debt gives a sense of survivalship to this pro-longed health crisis (M. Chapra, 2014). For instance, in a suburbs Muslim area in Metro City, Indonesia, 51.2\% out of 250 low income households are entangled in debt. This group has lost their source of income at a significant rate, and must sustain daily need using unavoidable interest-rate bearing debt. Their creditors are private loansharks and/or registered financial institutions. While some of the group member has lost its collateralized assets, majority still continue to borrow from financial institutions and individual lenders. This pandemic crisis will drag this sub-prime group into further poverty traps (Dowling et al., 2020). In contrast to the debtor group, there is a group of people who still take into account religious financial values in order to make up their decision. They observe the prohibition and instead exercise risk-sharing to the extent of their capability. For this group, religious teachings are still the main driver for financial decision, particularly in terms of risk-taking behavior (León & Pfeifer, 2017). With income being affected by the crisis and all its restrictions, this group still maintain to control their financial situation. Today, this group is able to survive with existing financial assets without having debt at all. Studying this two group and examining what makes up their financial decision and how the relationship is the primary interest of the paper. Particularly during this pandemic, that a responsible and cautious financial behavior is imperative in order to survive and keep personal economy afloat. It is said that a more responsible asset management is pivotal to climb up income ladder, otherwise poor behavior causes difficulties thus tend to force a decline in the welfare status (Mudzingiri et al., 2018). It is often observed that poor people making a poor decision in assets management (Moga Dass & Fazli Sabri, 2017; Malik et al., 2020). Poor financial behavior is a common gate to a vicious debt trap and endless poverty (Moro Visconti, 2012). Page 2 of 18Journal of Economic and Administrative Sciences 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Journal of Econom ic and Adm inistrative Sciences3 2. Literature Review In general, financial behavior is about money management (Jing Jian Xiao, 2015). In a wider scope, it includes consumption, credit and saving activities, investment decision, and cash management (Stolper & Walter, 2017). A person with positive behavior will be likely to display better cash management, save more money, have better control on debt, and focus to make asset more productive. A responsible financial behavior aims to maintain wealth by measures against risks and uncertainty. Thus, this individual could predict and foresee what will happen and if it happened, what could be the consequences of the action. Such responsible financial behavior is influenced by good understanding of financial literacy, a good financial attitude, and a positive locus of control (Strömbäck et al., 2017; Tang & Baker, 2016; Widyastuti et al., 2020). The second factor is knowledge. There are various studies linking literacy and behavior, that one’s understanding on financial products will empower them to have control onto the assets management (Çera et al., 2020; Diepstraten & van der Cruijsen, 2019; Rousseau & Venter, 2019; Yong et al., 2018). Financial literacy measures one understanding and awareness on the financial products and risk management (OJK), 2013). Low financial literacy would result in a perilous financial decision. A recent study by Indonesia Financial Service Authority (OJK) shows that Indonesian financial literacy index is still low (OJK), 2013), thus highlighting the linearity relationship between financial literacy and the financial behavioral problem in Indonesia. The aspect involved comprehension towards individual’s priority on the asset management given the limited financial resources (Herdjiono & Damanik, 2016). There is no evidence, however, suggests education and financial literacy must be correlated, and that welfare status (i.e. parental income) does not significantly affects literacy (Chen, H., & Volpe, 1998; Lusardi & Mitchell, 2013; Mandell & Klein, 2009). Therefore, being uneducated and poor are not the ex-ante factor for having good financial literacy. Despite such, financial literacy is indeed the contributing factor to the prosperity (Margaretha & Pambudhi, 2015). Financial literacy enables individual to understand instruments, future planning, insurance, wise consumption, and managing unprecedented life events (Cohen & Nelson, 2011). A study by (Purwidianti & Tubastuvi, 2019) finds that financial literacy has a positive but not significant effect on financial behavior amongst the Small Medium Enterprises (SMEs). Such result is interesting, because SMEs owners are usually classified as low income group. Studies by (S. A. Allgood & Walstad, 2012; Arifin, 2017) indicate that financial literacy affects significantly and positively on financial behavior. It suggests, that the higher the level of financial literacy, the better one’s personal financial Page 3 of 18 Journal of Economic and Administrative Sciences 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Journal of Econom ic and Adm inistrative Sciences4 management behavior. Otherwise, lower of financial literacy signifies poor personal financial management behavior. This paper introduces one novel aspect that is Islamic financial literacy. Islamic financial literacy covers the understanding and awareness of a Moslem towards Islamic financial principles and instruments (Abdullah et al., 2017). It is operationally indicated by understanding and priority of Islamic financial redistribution instruments, such as Infaq and Sadaqat. By introducing this new variable, the paper aims to gauge more information whether Islamic teachings will lead to a responsible financial behavior amongst Low Income Moslem group. Another variable is financial attitude. There are six concepts surrounding attitude, namely, obsession, power, effort, inadequacy, retention, security (Herdjiono & Damanik, 2016). Obsession entails one’s paradigm or mindset on money management. Power refers to money as the medium for control and problem solving. Effort implies that money is earned by work. Inadequacy reflects the feeling of having not enough money. Retention tends to save money and not spend it all. Lastly is security, that refers to traditional mindset that money should be kept at own house. There are also studies indicated the dominance of financial attitude in affecting financial behavior (Ameliawati & Setiyani, 2018; Yap et al., 2018; Yong et al., 2018). It is found that moral, cultural, and personal values are components of financial attitude that affect one’s financial decisions (Yap et al., 2018), and that attitude has greater influenced to behavior than literacy (Yong et al., 2018). Financial attitude also makes an important contribution in achieving success or failure in the financial aspect. As a convention, one who demonstrates positive attitude will be more likely to display a responsible and sustainable financial behavior for the future (Ameliawati & Setiyani, 2018). The third variable is locus of control (or peer-reference). Locus of control is a psychological concept that captures individual beliefs on the causal relationship between their own behavior and life events (Cobb-Clark et al., 2016). There are two types that are external and internal locus of control (Arifin, 2017). Internal locus of control describes the presence of a controller within a person, and external locus of control is the environment and peer references that influence one’s behavior (Thi et al., 2015). In other words, internal locus of control is motivation withthin the self to achieve his/her vision. A good environment and peer reference are the external forces which shape a certain attitude and thence behavior (Budiono, 2020). Another variable to take into account is Financial inclusion. Financial inclusion is a process for access to financial services used in a timely and adequate manner (Rajan, 2013) and is considered an important tool to promote inclusive growth and reduce poverty Page 4 of 18Journal of Economic and Administrative Sciences 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Journal of Econom ic and Adm inistrative Sciences5 (Morgan & Long, 2020). There are four indicators reflecting inclusion, namely; Access, Availability, Uses and Welfare (Adam et al., 2021). By access, it means the ability to access financial services available at financial institutions, of course, there are no barriers to opening and using financial services (Bankable Frontier Associates, 2010), whereas availability is a banking service process that must be done easily and is available to users (Suci & Rikumahu, 2021). Uses are a measurement of the combination of financial products used by a person or family. In other words, inclusion entails a more detailed combination of measurements of the regularity, frequency, and duration of using financial product services (Bankable Frontier Associates, 2010)(Suci & Rikumahu, 2021). And finally, welfare, a financial service that is used properly and appropriately will make its users prosperous (Adam et al., 2021). Financial behavior is the variable of interest of this paper. Financial behavior tries to uncover and explain how individual make his/her decision. It also explains inconsistency of one’s financial behavior (Arifin, 2017). It has two perspectives: cognitive psychology and its limits of arbitrage. Cognitive control refers to how individual manage his/her assets in terms of their financial knowledge or literacy (Purwidianti & Tubastuvi, 2019). There are four measurement indicators of financial behavior, namely; Consumption, Cash-flow Management, Saving and Investment, and Credit Management (Dew & Xiao, 2011). This study attempts to improve the current research on financial behavior by scaling up what makes up financial decision of debtor and debt-free groups in the frame of Pandemic crisis. Current study by those of (Dollar & Kraay, 2002; Dowling et al., 2020; Kraay & McKenzie, 2014; Kraay & Raddatz, 2007) focuses on the poverty traps of the subprime group. A comparative study is important to understand and highlight factors enabling one to fall into debts while others are still maintaining religious principles amidst all onsets and difficulties. While financial aid is necessary to relieve economic burdens during Pandemic, this research also aims to provide policy recommendation based on the findings on programs that could integrate crisis and long terms solutions to poverty alleviation. 3. Methodology This study employs Structural Equation Modeling Partial Least Square (SEM-PLS). SEM-PLS is a second-generation multivariate data analysis method (SEM) that is intended for data-rich and theory-skeletal study (Hair, J. F., Hult, G. T. M., Ringle, C. M., & Sarstedt, 2013). SEM-PLS is employed because it has advantage of no assumptions about data distribution (Swastika, 2020; Wong, 2013). Furthermore, it is also attributed to a number of advantages, among others, are: (1) applicable to non-normal data, (2) small sample sizes Page 5 of 18 Journal of Economic and Administrative Sciences 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Journal of Econom ic and Adm inistrative Sciences6 (Wong, 2013), and (3) formative indicators (Hair, J. F., Hult, G. T. M., Ringle, C. M., & Sarstedt, 2013) which is suitable for the research. As for analysis software, the research employed the SmartPLS Version 2.0.M3 (http://www.smartpls.de). This study underwent the following steps: (1) model specification; (2) outer model evaluation. This is done by checking the quality of outer model through: (a) validity tests, which are; Convergent Validity, Discriminant Validity, and Average Variance Extracted (AVE), and (b) reliability tests using Composite Reliability Coefficient and Cronbachs Alpha; (3) inner model evaluation. The t-statistics and R-Square for measuring the relationships amongst the variables and goodness of fit of the model. The first model, i.e. the debtor group, is taking answers from 150 respondents, using purposive sampling (Kadilar & Cingi, 2012) with the following criteria: (1) respondent must currently indebted, and (2) income under USD 140/month (or roughly Rp. 2.000.000/month) as it is below the minimal wage. The questionnaires are in form of Likert Scale of 1-5 (1 is extremely disagree, and 5 is extremely agree), distributed in papers and were collected in person (or door-to-door) from the second week to the forth week of January 2021. This mechanism will allow respondents to answer privately and ask questions to researcher if they had doubts in the questionnaires. Prior data collection, the questionnaires have been tested to 20 respondents with 45 indicators. From the first trial, it is evaluated that only 21 indicators that are valid and reliable, thus is used as instruments for the study. The second model, i.e. the debt-free group, surveyed 87 individuals. Like the first group, these people are selected under this criteria: (1) not having interest-rate bearing debt to private/institutional institution. Whereas first group is filtered by its income level, we dropped the question to the second group by the income level because it is not easy to find debt-free respondents under the same level of income in this current situation. Instead, the chosen respondents are maintained within the middle class income category. In the debt-free group, the majority aged 22 to 35 years. With a variety of jobs, the majority of jobs are Employees, Entrepreneurs, and Civil Servants. We developed two similar questionnaire, with adjustments to terminologies and more parsimonious questions to the debtor-group. By parsimonious questionnaires, we have pre-surveyed the debtor group and found that none of them are excluded from financial institutions. All members of this group are in fact have accounts in banks or microfinancial Page 6 of 18Journal of Economic and Administrative Sciences 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Journal of Econom ic and Adm inistrative Sciences7 institutions, as they seek for credit. As for this group, the questionnaires have been pre- tested with 45 indicators excluding financial institutions. For the second group, the questionnaires are developed under the same indicators with advancements on terminologies on inclusion and Islamic financial literacy. As a result of pretesting, the final questionnaires consists of also 45 valid indicators. By carefully crafting the questionnaires and sticking to indicators, we hope to be able to compare these two different group within a similar framework. The distribution or data collection process is also executed differently. For the first group, questionnaires were distributed in papers and were collected in person (or door-to- door). This mechanism will allow respondents to answer privately and ask questions to researcher if they had doubts in the questionnaires. For the debt-free group, we used Google Form and distributed it to agreed respondents within a period of time. It is assumed that the second-group will feel more privacy and independent under such mechanism. The questionnaires are in form of statement where respondents could choose 1 to 5 (1 is extremely disagree, and 5 is extremely agree) likert scale. 4. Result & Discussion This study conducts validity and reliability tests to measure how well these indicators reflect the inner model. Validity test is to measure the quality of indicators reflecting the variables in this study (Taherdoost, 2018). This validity test employs the Convergent Validity and Discriminant Validity tests. Convergent Validity assess reflective validity to represent the variables. It can be seen from the Outer Loading value and is considered valid when loading factor result is above 0.5 (Ghozali & Latan, 2015). Discriminant Validity Test is to measure the extent to which the latent variable differs from other latent variables. Discriminant validity means that the latent variable can explain more variance in the observed variable associated with it than a) measurement error or similar unmeasured external influence; or b) other constructs within the conceptual framework (Taherdoost, 2018). Discriminant validity can be done using the AVE value. AVE is the main average value of the load box of a set of indicators (Hair et al., 2017)). The reliability test consisted of composite reliability and Cronbach alpha test. Composite reliability results will be satisfactory if the value is above 0.7. As shown in Table 3, that the composite reliability value for all constructs is above 0.7 which determines that all constructs in the estimated model are reliable. And for the lowest composite reliability value is 0.771 for the FA construct. The recommended value of the Cronbach’s Alpha Test is above 0.6 for reliable construction. In the table above, the Cronbach’s Alpha values for all constructs are above 0.6 (Ghozali & Latan, 2015). The lowest value is 0.502 for the Peer- Page 7 of 18 Journal of Economic and Administrative Sciences 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Journal of Econom ic and Adm inistrative Sciences8 Reference construct. This reliability test can also be strengthened by the results of the Cronbach’s Alpha Test. Table 2. Reliability Test: Composite Reability dan Cronbanchs Alpha Composite Reliability Cronbachs Alpha Note FA 0.774466 0.638588 Reliable FB 0.746795 0.613964 Reliable FL 0.766727 0.651627 Reliable LOC 0.794344 0.661750 Reliable Source: The result of data processing Table 3. Reliability Test: Composite Reability dan Cronbanchs Alpha for Debt- Free Group Composite Reliability Cronbachs Alpha Note FA 0.771 0.634 Reliable FB 0.853 0.813 Reliable FI 0.900 0.874 FL 0.929 0.918 Reliable Motivasi 0.838 0.716 Reliable Peer- Reference 0.788 0.502 Reliable Source: The result of data processing From the Outer Model Measurement above, it could be inferred that the convergent validity is adequate. According to Fornell and Larcker criterion, despite that the FB and FL showed to have AVE value less than 0.5, their composite reliability and cronbachs alpha are higher than the threshold (Fornell & Larcker, 1981). Table 4. Hypothesis Testing Hypothesis Beta- Coefficient (β) t- Statistic P- value Note FL  FB 0,226 2,175 0,001 Accepted FA  FB 0,272 3,045 0,016 Accepted LOC  FB 0,344 2,774 0,003 Accepted As the result implies, the effect of all independent variables towards the dependent variable is significant, as stated in the result of the t-statistic which is greater than 1.96 (at the 5\% significance level). Figure 1. Hypothesis Testing for Debtor Group Page 8 of 18Journal of Economic and Administrative Sciences 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Journal of Econom ic and Adm inistrative Sciences9 The result shows that the effect of financial literacy on financial behavior is significant, with a t-statistic value of 2.175 ( 1.96), and has positive direction with beta ≥ coefficient of 0,226. It also demonstrates the effect of financial attitude on financial behavior is significant, with a t-statistic value of 3.045 ( 1.96), and has positive direction with beta ≥ coefficient of 0,272. Lastly, the effect of locus of control on financial behavior is significant, with a t-statistic value of 2.774 ( 1.96), and has positive direction with beta coefficient of ≥ 0,344. The coefficient of determination (R-Square) shows that FA, FL and LOC can be used simultaneously to explain FB by 44,32\%. It indicates that the model can be used for the research. As for the second group, we improved Goodness of Fit of the model by introducing intervening variables. Therefore, in order to examine the determinants of financial behavior amongst the debt-free group, Path Analysis is executed. Path analysis allows the research to test direct relationships between variables and indirect relationships between variables in the model (Ghozali & Latan, 2015). The following equation is translated from the research path diagram, as follows: FI = 0.574 IFL + .......... (eq. 1)𝜀 FA = 0.277 IFL + 0.204 P-R — 0.215 M + .........( eq. 2)𝜀 FB = 0.452 FA + 0.216 FI + ............ (eq. 3)𝜀 FB = 0.216 FI + 0.452 FA + 0.124 FB.FI.FL + ..............( eq. 4)𝜀 FB = 0.216 FI + 0.452 FA + 0.125 FB.FA.FL + ............( eq. 5)𝜀 FB = 0.216 FI + 0.452 FA + 0.092 FB.FA.PR + ............( eq. 6)𝜀 FB = 0.216 FI + 0.452 FA — 0.215 FB.FA.M + .............( eq. 7)𝜀 Furthermore, measuring the size of the mediating or intervening variables can carry out the calculation of VAF (Variance Accounted For), with formula: Page 9 of 18 Journal of Economic and Administrative Sciences 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Journal of Econom ic and Adm inistrative Sciences10 VAF = Indirect effect Total effect The rule of thumb for VAF value is when VAF ≥ 80\%, it indicates the role of the variable as a full mediator/intervening. When VAF value is 20\% – 80\%, it can be said that the mediator/intervening is categorized as a partial mediator. However, if the VAF < 20\%, it can be concluded that there is almost no mediating effect. In this study the VAF value is as follows; VAF (Financial Inclusion) = = 0. 33 = 33 \% 0.124 (0,124 + 0.249) VAF (Financial Attitude) = = 0. 88 = 88 \% 0.092 (0,092 ― 0.113 + 0.125) The results of the VAF assessment above, that for Financial Inclusion is 33\%, meaning that the financial inclusion variable can be categorized as a partial mediator. Partial mediation indicates that there is direct and indirect linkage of independent variables to the dependent variable, i.e. financial behavior. As for the financial attitude variable can be categorized as a full mediator. Furthermore, the T-statistic and R-Square test, but in this study using Q-square because there pf mediator variables. T-statistic with conditions (greater than 1.96). Figure 2. Hypothesis Testing for Debt-Free Group 3.597* Peer- Reference Motivation Financial inclusion Financial Attitude Financial Behavior 9.249* 1.805* 2.085* 1.608* 2.001* 0.53** Islamic Financial Literacy Note : *t-statistic ** Q-square Page 10 of 18Journal of Economic and Administrative Sciences 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Journal of Econom ic and Adm inistrative Sciences11 The result shows that the variable Islamic Financial literacy on Financial Attitude has a significant influence (t-value of 2.085 ≥ 1.96), Islamic financial literacy on financial inclusion has a significant effect (t-value of 9.249 ≥ 1.96). Peer-Reference and Motivation variables have no significant positive effect (t-value Peer-Reference 1,608≤ 1.96, while Motivation 1,805≤ 1.96). Meanwhile, the intervening variable has a significant effect (financial inclusion has t- value of 2,001 ≥ 1.96 and financial attitude has t-value of 3,597≥ 1.96). The formula of Q-square; Q-square = 1 — {(1— R-square1) (1— R-square2 )}, Q-square = 0.53 or 53\%. This indicates that the model is feasible for this study. Discussion This study examines and compares determinants of financial behavior amongst groups of Muslim that currently indebted and does not have debt/financing. The results demonstrate that, amongst indebted group, attitude, Islamic financial literacy, and peer- reference, all have a …