The Influence of Financial Inclusion and Macroeconomic on Foreign Direct Investment (FDI) Flows in The Organization of Islamic Cooperation (OIC) Countries

relatively and tend be ABSTRACT Foreign capital flows are important factors in the development of sustainable economies, especially in developing countries such as the OIC countries. Lately, the rapid development of the financial sector and macroeconomic stability became a serious concern by foreign investors, where financial inclusion and macroeconomics played an important role in attracting direct foreign capital flows (FDI). The study aims to investigate the role of financial inclusion and macroeconomic variables on the foreign direct flow of capital (FDI) by using data panels in 8 OKI member States during the 2012-2018 time span. The research uses the Fix Effect Model (FEM) Panel data Analysis tool, which is believed to be able to explain the correlation between independent variables and more accurate dependents. As for the results of the study showed that in partial only variable avaibility (the number of branches of the bank/100,000 adults) is a significant positive draws FDI in the OKI country. While on macroeconomic variables the exchange rates have significant negative effect on FDI, while interest rates and economic growth have significant positive relationships in attracting FDI.

Foreign capital flows are important factors in the development of sustainable economies, especially in developing countries such as the OIC countries. Lately, the rapid development of the financial sector and macroeconomic stability became a serious concern by foreign investors, where financial inclusion and macroeconomics played an important role in attracting direct foreign capital flows (FDI). The study aims to investigate the role of financial inclusion and macroeconomic variables on the foreign direct flow of capital (FDI) by using data panels in 8 OKI member States during the 2012-2018 time span. The research uses the Fix Effect Model (FEM) Panel data Analysis tool, which is believed to be able to explain the correlation between independent variables and more accurate dependents. As for the results of the study showed that in partial only variable avaibility (the number of branches of the bank/100,000 adults) is a significant positive draws FDI in the OKI country. While on macroeconomic variables the exchange rates have significant negative effect on FDI, while interest rates and economic growth have significant positive relationships in attracting FDI. 10. 12928/optimum.v10i2.15012 is because an investor presents several specific factors related to the country of investment destination such as market size, wage level, fiscal burden, trade openness, political stability, and macroeconomic situation are major considerations for foreign investors (Karacan, 1997;Akay &Karakay, 2008).
The research of Demirhan and Mahmut's (2008) and Qamar (2019) found empirical evidence that macro variables such as per capita GDP, inflation rate, telephone lines, labor costs, openness levels, risks and tax rates have a relationship in FDI withdrawal in developing countries. FDI is not entirely influenced by macro variables alone, some other studies have found that corporate governance and the power of trade bargaining, political stability and property rights are also efficient factors for attracting FDI (Federke &Romm, 2006). Adam and Tweneboah (2009) and Al Nasser and Soydemir (2010) discovered a longterm relationship between FDI and financial markets. In addition, Qamruzzaman and Jianguo (2019)  In recent decades, developing countries are very serious in improving the level of financial inclusion in their country is no exception in the countries of the Organization of Islamic Cooperation (OIC). This is because financial inclusion greatly contributes positively to economic growth and has an important role in attracting foreign capital flows to the host country. Recently OIC countries have had very rapid growth in financial markets, banking system, and stock flows that go into FDI in unctad report (2000). Taj gardoon et al (2015) explained this through its findings that financial markets have a positive relationship with FDI. Furthermore, he explained that the development of the financial sector can stimulate the economic performance of the real sector through productive loans so that it will increase economic growth in the country.

The Organization of Islamic Cooperation (OIC) is a multilateral organization between
Islamic countries followed by 57 Islamic countries from all over the world. OIC member states are made up of a variety of different economic backgrounds, there are rich countries, new industrialized countries, service-based economies, and poor countries. Many OIC developing countries rely on foreign capital sources such as FDI to support their economic growth to get out of the circle of backwardness and poverty. In 2018 FDI in OIC countries reached 104.4 billion dollars or 8.3% of the world's total FDI which reached 1.3 trillion in 2018 (SESRIC, 2019). The figure is quite large but the distribution is still concentrated in some countries only.
Optimum Vol. 11. No 1, March 2021 p. 72-92 The  0  2000  4000  6000  8000  10000  12000  14000  16000   _Afghanistan  _Afghanistan  _Afghanistan  _Afghanistan  _Bangladesh  _Bangladesh  _Bangladesh  _Cameroon  _Cameroon  _Cameroon  _Cameroon   _Berunai   Darussalam   _Berunai   Darussalam   _Berunai   Darussalam  _Malaysia  _Malaysia  _Malaysia  _Malaysia  _Nigeria  _Nigeria  _Nigeria  _Pakistan  _Pakistan  _Pakistan  _Pakistan  _Uganda  _Uganda  The large role of the development of the financial sector and the macro situation of a country in the withdrawal of foreign capital flows, has been a serious concern by academics, practitioners, and investors recently. Financial sector development consists of capital and banking markets that can be reflected by financial inclusion which is an important indicator in the role of FDI withdrawal in a country. That is because financial inclusion acts as an incentive and signal of economic stability for foreign investors who are interested in investing in direct form such as in the production and infrastructure development sector (Qamruzzaman & Jianguo (2019). In addition, macroeconomic conditions such as inflation, interest rates and GDP growth of a country also play an important role in the withdrawal of FDI (Demirhan & Mahmut, 2008;Qamar, 2019). However, in some OIC countries there is a discrepancy that shows that FDI plays a big role in economic growth, while the inclusion rate is still low.

Financial Inclusion
Financial inclusion is the ease of access, availability, and benefits of the formal financial system for all economic actors (Sarma, 2012). Financial inclusion connects people, especially the poor, into the formal banking system with safe, easy and affordable access to credit and other financial services (Sarma &Pais, 2011). Financial inclusion is closely related to well-being, some empirical studies show a positive relationship between financial system development and economic growth in the long run. Levine (1998;1999), andDemirguckent et al (2008) found financial inclusion had an impact on decreasing income inequality (coefficient of gini), increasing the incomes of the poor, and lowering the percentage of poverty. This is because of the increasingly open access to financial services, the public will use the funding support in the form of credit to help in improving the productivity of their  Vol. 11. No 1, March 2021 p. 72-92 The Influence Of Financial Inclusion… (Farma Andiansyah) 75 business or business.
In the measurement of financial inclusion, there are various methods of approach to facilitate the measurement, one of which is by using indexes. Sarma (

Financial Inclusion and FDI
Foreign Direct Investment (FDI) is one of the types of foreign capital flows recognized as the capital transfer that contributes the most to improving economic growth compared to external assistance and money transfer into the country. That is because the flow of FDI is always production-oriented and becomes a medium of technology transfer and management skills and also creates jobs. FDI inflows also have long-term investment prospects so that in its operations, the turnover of foreign capital in the country is considered more economically profitable for the host country. Some previous studies have mentioned that economic freedom, especially in the aspects of a country's trade policy, banking and financial services and property protection have an important role in improving the performance of FDI in developing countries (Globerman &Shapiro, 2003).  (2019) stated that financial inclusion acts as an incentive and signal of economic stability for foreign investors interested in investing in direct forms such as in the production and infrastructure development sectors.

Macroeconomics
Macroeconomic discussion is a study of economics that studies economic events and problems as a whole and aggregated (Nanga, 2001). In general, macroeconomics explain the economic changes that have a wide impact both on society, companies and markets.
Macroeconomic issues can be divided into issues such as inflation and deflation, exchange rates, unemployment, interest rates, economic growth, income and expenditure, balance of payments, and money circulation within a country. Macroeconomics are very important for a country because macroeconomic balance can have a positive impact on a country's economy and can also adversely affect if the macro-economy is unstable.

Interest Rate and FDI
Interest rate is a cost burden set in order to borrow money for a certain period of time usually in the form of a certain percentage (Fabozzi & Fancais, 2003). Bodie et al (2006) described interest rates as systematic risk factors that affect the investment value of debt  Vol. 11. No 1, March 2021 p. 72-92 The Influence Of Financial Inclusion… (Farma Andiansyah) 77 securities and foreign investment. Because the investor will invest the funds if the rate of return offered exceeds or at least equals the prevailing interest rate. In other words, if the rate of return is less than the interest rate then the investor is reluctant to invest. This reasoning reinforces the theory that interest rates affect FDI inflows in a country (Sukirno, 2006). Some studies have found interest rates have a significant negative influence on FDI. Tulong et al. (2015) show that in the short term there is an insignificant negative relationship between interest rates and foreign direct investment but in the long run interest rates increase the flow of foreign direct investment (FDI). That is because when interest rates are high people will be motivated to save money to deposit products and delay secondary consumption. As a result, it will reduce the amount of money in circulation and transaction activity, so that activity in the real sector grows slowly and decreases the interest of foreign investors in investing in the country.

Inflation and FDI
Inflation is a phenomenon when the price of goods and services in general increases continuously in a certain period of time (Kariem, 2010). The high state of inflation will complicate economic development, because rising prices of goods decrease people's purchasing power, thus negatively impacting productive activities. In addition to weakening domestic productive activities, rising prices of domestically produced goods will also complicate competition in the global market (Sukirno, 2006). An unstable economy due to too high inflation negatively impacts investment activities, as the cost of expensive investments is not offset by increased demand from consumers. This will affect the sentiment of foreign investors to invest in the country.
In addition, inflation has been hypothesized as well as distorting the tax system which in turn will deter investors for the long term due to the illusion of money (Omankhanlen, 2011). In this context, Andinuur (2013) conducted research to test the relationship between inflation, FDI, and economic growth in Ghana. Researchers state that the low inflation rate is indicative of internal economic stability in the host country and will in turn increase the return on foreign direct investment. Furthermore, the researchers explained that the low inflation rate in a country encourages FDI, where when the inflation rate is low, the nominal interest rate decreases and consequently the cost of capital becomes low. In addition, the availability of capital at low loan rates will allow foreign investors not only to find better partners in the host country, but will also maximize the return on their investment. In addition, Alguaci, Cuadros and Orts (2011) found that the inflation rate negatively impacted 10.12928/optimum.v10i2.15012 FDI in asean countries. The researchers explained that because inflation exceeds the threshold, it will negatively affect FDI inflows to the country.

Exchange Rate and FDI
According to Ekananda (2014) (Sukirno, 2006). Several previous studies supporting the above theory include Tulong et al. (2015), Permana and Rivani (2013), Rasheed and Qamar (2019) finding that GDP will be significantly positively correlated to FDI inflows and vice versa. The smaller the economic growth rate of a country, it will decrease the value of FDI.

Research Methodology
In this study the authors will use descriptive quantitative methods using panel data analysis tools. Panel data is data obtained from cross section data that is observed repeatedly on the same individual unit (object) at different times. This model has the advantage of being able to control unobserved heterogeneity, be more informative, learn more complex models, reduce comlinearity, increase the degree of freedom and be efficient and can measure the effect of a variable on other variables better than just using time series or cross section data so as to reduce bias in conclusion withdrawal (Junanda &Junaidi, 2012).
The data panel regression model used in this study is as follows: Model

Financial Inclusion
To measure the level of financial inclusivity can generally be characterized by the amount of use of banking services and see how affordability of formal financial institutions at all levels of society. Because the easier it is for people to access finance, the higher the level of financial inclusion of the country (Inoue &Hamori, 2016). The variable the researchers used to reflect that accessibility was the number of depositors per 1,000 adult population. As for variable availibitas use the availability of banking branch offices per 100,000 adult residents. And for variable usefulness researchers use total banking financing per GDP. adult populations, then no more than 5 bank branches per 100,000 adults and total bank financing loans are less than 20% of the country's total GDP.

Macroeconomics
Macroeconomics explains the economic changes that have a wide impact on society, companies and markets. In investment theory the state of macroeconomics has an influence on the performance of investment in a country (Tandelin, 2010

Financial Inclusion of FDI in OIC countries
The data regression panel results using three approaches namely common Effect

Uji Chow Test
The result of regression between the common effect model and fixed model, the following results are obtained:

Hausman Test
Hausman test was conducted for the selection of the most appropriate model between the FEM and REM models.  significance value exceeds α=0.05. This indicates that when the number of bank branches increases, it will certainly make it easier for people to reach financial services and products so that financial functions are more stable. In addition, investors are also more flexible in allocating funds to the production sector because the process of withdrawing money from banks as intermediaries can be easier.

Macroeconomics to FDI in OIC Countries
From the Table 6 shows that the highest R-square value by using the Fixed Effect  This test is conducted for the selection of models between common effect models with fixed models, as for the results of regression of this model as follows:

Hausman Test
Hausman's test was conducted for the selection of the most appropriate model used between FEM and REM.  In variable inflation has a t-statistic of -2.419159 with a significance of 0.0198 smaller than α=0.05% so that the inflation rate has a negative relationship and has a significant effect on the flow of FDI in OIC countries. This is because when the inflation rate is too high of course the purchasing power of the public will decrease, thus reducing the company's income and resulting in a decrease in economic growth and giving rise to a negative view of foreign investors to invest long-term in the form of FDI. This is in line with the research of Xaypanya et al (2014) which also found that inflation has a significant negative influence on FDI in ASEAN countries.
While the variable exchange rate also has a significant negative effect on FDI indicated from the t-statistical value -2.069347 with a probability significance of 0.0444 less than α=0.05. This is because the exchange rate of the sample country is still weak against the dollar and fluctuating high. Because when it is too high of course raw materials imported from abroad will be more expensive and therefore the goods produced in export will certainly be more expensive so that the competitiveness abroad is weak. This is in line with lily et al. research (2014) which found that when the purpose of investment to export products abroad, the exchange rate will have a significant negative effect on FDI because the price of such goods will be more expensive so it is difficult to compete with foreign products.
For variables of economic growth projected by GDP, the t-statistical value indicates a positive relationship with the value of 3.193853 and significant at a probability of 0.0026 smaller than α=0.05. That means economic growth in OIC sample countries has an impact on increasing FDI flows into the country. This is because when the economic growth of the host country has progressed well and stable development will encourage the desire of investors to invest their funds in Optimum Vol. 11. No 1, March 2021 p. 72-92 The Influence Of Financial Inclusion… (Farma Andiansyah) 87 the country because investor decisions are largely determined by an optimistic view of the host's investment opportunities. This research is in line with research by Rasheed and Qamar (2019) which proves GDP plays a significant positive role in FDI flows in ASEAN countries.

Conclusion
The study found that financial inclusion has a significant positive relationship to the growth of FDI fund flows. This can be explained because financial inclusion through the addition of bank branches acts as an incentive for foreign investors especially in the production sector and infrastructure because the process of withdrawing money from banks as intermediaries can be easier. In addition, the addition of the number of bank branches will certainly facilitate the public in reaching financial services and products so that financial functions are more smooth and stable. The findings of research on macroeconomics also have a close relationship with FDI withdrawals, such as interest rates that have a significant positive influence on FDI through credit products with interest rates that are relatively still in the single digits turned out to be a stimulus in driving economic growth. While inflation and exchange rates have a significant negative influence because the increase in the price of goods and the dollar triggers the increase in production costs so that the price of goods produced is also expensive and difficult to compete with foreign products. While economic growth is positively correlated significantly in attracting FDI. This is because good economic growth will be an optimistic hope for foreign investors to invest their funds into OIC countries.

Suggestions
This study is still experiencing limited data on the countries of the Organization of Islamic Cooperation that became a sample of the study, so it is expected that the next researchers to explore more OIC countries so that the withdrawal of conclusions is more accurate. In addition, researchers are further advised to develop research using the Islamic financial inclusion index because given the rapid growth of the Islamic financial sector in these OIC countries. The study found that further increases in financial inclusion specific to Avaibility or an increase in the number of bank branches led to continued ease of FDI inflows. Therefore the government and 10.12928/optimum.v10i2.15012 financial authorities should pay great attention to the development of the financial sector and simultaneously formulate policies aimed at improving financial inclusiveness in OIC countries. In addition, the government also needs to maintain macroeconomic stability in the country both with low interest rates, low inflation, stable exchange rates and progressive economic growth as well as other macro policy policies that support the ease of FDI withdrawal into the OIC country.