REGULATIONS RELATED TO THE ESTABLISHMENT AND DEVELOPMENT OF SHARIA FINANCIAL INSTITUTIONS IN INDONESIA.

Author:Hidayat, Yusup
Position:Report - Abstract
 
FREE EXCERPT

INTRODUCTION

One of the most important precepts highlighted in recent times is the issue of social justice, where the distance between those who are wealthy and those who lack the need to be so far is not the ideal condition to be achieved by the Indonesian people. In the preamble of the 1945 Constitution mentioned about the national goal of the Indonesian nation that is protecting the whole Indonesian nation and the entire blood of Indonesia, promoting the general welfare, the intellectual life of the nation, and involved in world peace based on freedom, eternal peace, and social justice. These principles are the principal rules that build Islamic economic structures or frameworks. Islamic economics is an integral part of Islam. Islamic economics follows the teachings of Islam in its various aspects, including the doctrine of justice (Chapra, 1993). Islamic economics is defined as a branch of science that seeks to see, analyse, and ultimately solve economic problems in Islamic ways. Islamic ways here are understood as ways based on Islamic teachings of the Qur'an and the Sunnah of the Prophet. Manan (1986) mentioned that Islamic economics is a social science studying people's economic issues inspired by Islamic values. Muhammad Akram khan (1994) mentioned that Islamic economics aims the study of the human well-being achieved by organizing the resources of the earth on the basic of cooperation and participation.

Meanwhile, Ash-Shiddiqy (1992) mentioned that Islamic economics is the thinkers' response to the economic challenges of their time. In this endeavour they were aided by the Qur'an and the Sunnah as well as by reason and experience. Khan (1994) stressed the principle of cooperation and participation while Ash-Shiddiqy (1992) emphasized the response of Muslim thinkers based on the Qur'an and the Sunnah. Particularly in Indonesia, Pancasila based on MPR Decree No. XVIII of 1998 is the basis of the State which must be obeyed by all the people of Indonesia. The formulation of the precepts contained in Pancasila is the result of the thought of the Founders of the Nation that is influenced by three important values, namely religious values, customs values, and the values of the great ideologies that were very influential at the time (Ghofur et al., 2017; Wicaksono, 2018). The influence of religion is reflected in the five precepts, from the concept of divinity, humanity, unity, democracy, and social justice. The divine principle animates all other precepts. In the Explanation of Law No. 3 of 2006 Article 49 letter I mentioned the meaning of sharia economy is an act or business activity which is carried out according to sharia principles. The principle of sharia itself is a principle that is in accordance with Islamic law with its main reference of the Qur'an and Al-Hadith. Islamic economic activity in Indonesia as mentioned in the Elucidation of Law No. 3 of 2006 on Religious Courts include Sharia banks, Islamic microfinance institutions, Sharia insurance, Islamic reinsurance, Shariah mutual funds, Islamic bonds and Sharia pawnshops (Husain, 2006).

Sharia Banking

Historically, the idea of the need for a financial institution in the form of banking based on Islamic principles in Indonesia has developed long before the establishment of Islamic banking institutions in Indonesia as well as in the world (Huda and Heykal, 2010; Warman et al., 2018). K.H. Mas Mansur who is a Muhammadiyah figure and served as Chairman of the Muhammadiyah Executive of the period 1937-1944 has explained the reasons why it is still possible to use conventional banking due to forced conditions where Muslims do not have their own banks that are free from usury. At a special National Congress of Muhammadiyah in 1968 in Sidoarjo, the theme of bank law was one of the discussions. In the hearing it was affirmed that riba (interest) is illicit based on the Qur'anic and Sunnah texts; banks with interest is illegal and conversely, bank without interest shall be lawful; interest granted by state-owned banks to its customers in in mutashabihat category; suggested to Central Leadership of Muhammadiyah to work to realize the concept of economic system, especially banking institution in accordance with Islamic norms (Dewi, 2006).

Hence, Muhammadiyah explicitly declared the new bank interest law in 2006, (Muhammadiyah, 2006) where the Majelis Tarjih Muhammadiyah at the Muhammadiyah Supreme Deliberation in Yogyakarta issued a fatwa on 8 of 2006 which states that the interest of the bank is usury, and clear unlawful (Huda and Heykal, 2010). Thus, it will take a long time for Muhammadiyah to determine the interest of the bank with various forms. Meanwhile, Nahdlatul Ulama (NU) as the largest Islamic society organization in Indonesia has been discussing bank interest problem since 1937 through NU 12th Congress of 1937. At the hearing, it was stipulated that the law put money in Conventional Bank for security purposes only and not sure the money not used for something that is forbidden by religion. This bank interest issue always arose in the deliberations conducted by NU, as in the NU's Great Conference which was held on 19 March 1957 in Surabaya, in the National Conference of Islamic Scholars and the Great Conference of NU in 1982 in Bandar Lampung. The problem of bank interest law for NU is not one; however National Congress of the organization mandates the establishment of Islamic banks with interest less system. NU'S views on banks are diverse. First, the problems of conventional banks, there are NU circles who hold the view that the interest of banks riba in absolutely unlawful (Antonio, 2001).

Meanwhile, the other party stated that bank interest is not necessarily the same as usury, so it is allowed. Second, where the interest issues categorized as consumptive and productive interest, the NU holds that the productive interest of law...

To continue reading

FREE SIGN UP