ISLAMIC BANKING IN INDONESIA

ISLAMIC BANKING (SYARIAH) IS THE ALTERNATIVE SOLUTIONS

OF BENEFICIAL BANKING BUSINESS MODEL: LEARNING FROM MUAMALAT BANK IN INDONESIA

Rizal Adlan Mustafa

rizaladlanmustafa96@gmail.com

In Indonesia, the pioneer of Islamic banking is Muamalat Bank  of Indonesia. Established in 1991, the bank was initiated by the Indonesian Ulema Council (MUI) and the Government and the support of the Association of Indonesian Muslim Intellectuals (ICMI) and a Muslim businessman. This bank was affected by the financial crisis in the late 90s that the equity remains only a third of the initial capital. Islamic Developing Bank (IDB) then injected cash to banks and in the 1999-2002 period can be up and generating profits. Nowadays  in Indonesia where Islamic banks have been regulated in Law Law No. 10 of 1998 on the amendment of Law No. 7 of 1992 on Banking.

Until 2017 there were 12 institutions Islamic banks in Indonesia, namely

1 PT. Bank Muamalat Indonesia

2 PT. Bank Syariah Mandiri

3 PT. Bank Mega Syariah

4 PT. Bank BRISyariah

5 PT. Bank Syariah Bukopin

6 PT. Bank BNI Syariah

7 PT. Bank Jabar Banten Syariah

8 PT. BCA Syariah

9 PT. Bank Victoria Syariah

10 PT. Maybank Syariah Indonesia

11 PT. Bank Panin Syariah

12 PT. National Savings Bank Syariah

  Meanwhile, the commercial bank that has had Islamic business units of more than 50 banks of which are large banks such as Bank Negara Indonesia (Persero) and Bank Rakyat Indonesia (Persero). Islamic system has also been used by the People's Credit Banks, today has grown to 104 BPR Syariah.

The principle of Islamic banking

Islamic Banking is the rule according to Islamic law an agreement between the bank and other parties to deposit funds and / or financing of business activities, or other activities in accordance with sharia.

Some of the principles / law adopted by the Islamic banking system, among others:

·         Payment for a loan with a different value of the loan value with a predetermined value is not allowed.

·         Donors must also shared profits and losses as a result of operating results of institution borrowed funds.

·         Islam does not allow "make money from money". Money is only a medium of exchange and not a commodity because it has no intrinsic value.

·         Gharar element (uncertainty, speculation) is not allowed. Both parties should know well the results they will get from a transaction.

·         Investments should only be given to those businesses that are not prohibited in Islam. Enterprises liquor instance should not be funded by the Islamic banking.

Islamic banking products

Some of the product and services provided by the bank based on sharia, among others:

Services for borrowers

1.      Mudhorobah, is an agreement between a provider of capital to entrepreneurs. Each of the benefits achieved will be divided according to certain agreed ratio. The risk of loss is borne fully by the Bank except for losses caused by mismanagement, negligence and irregularities party customers such as misappropriation, fraud and abuse.

2.      Musyarokah (Joint Venture), this concept is applied to the model of partnership or joint venture. The benefits achieved will be shared in an agreed ratio while losses will be divided based on the ratio of the equity owned by each party. The fundamental difference with the mudaraba is in this concept there is interference management management while mudaraba no intervention

3.      Murobahah, namely the distribution of funds in the form of buying and selling. Bank will buy needed goods and then resell the service users to the service user at inflated prices determined in accordance bank profit margins, and service users are allowed to goods. The installment of flats corresponding contract at the beginning and the amount of installment = cost plus an agreed margin. Examples: home prices, 500 million, the margin bank / bank profits 100M, then paid borrowers is 600 million and paid over an agreed period beginning between the Bank and the Customer.

4.      Takaful (Islamic insurance)

Services for depositors

Wadi'ah (daycare), is a fund where the person care services can take these funds at any time. With the system wadiah Bank is not obliged, but are permitted, to give a bonus to customers.

Mudhorobah deposits, customers save money in the bank within a certain time frame. The advantage of investing in customer funds by banks will be shared between the bank and the customer with certain revenue sharing.

Fund Management Challenges

The rate of growth of Islamic banking at the global level no doubt. Assets of Islamic financial institutions in the world is estimated to reach 250 billion US dollars, growing an average of more than 15 percent per year. In Indonesia, the Islamic banking business volume during the last ten years the average growth of 60 percent per year. In 2005, the Indonesian Islamic banking posted a profit of Rp 238.6 billion, an increase of 47 percent from the previous year.

Malaysian Islamic banking profit print more than one billion ringgit (272 million dollars). End of March 2006, Islamic banking assets in the negeri jiran was almost 12 per cent of the total assets of the national banking system. While in Indonesia, Islamic banking assets in March 2006 period only recorded 1.40 percent of total banking assets. Bank Indonesia predicts accelerated growth of Islamic banking in Indonesia will begin in 2007 until now.

Office channeling policy implementation, support the government accelerated the form of account management pilgrim entrusted to Islamic banking, as well as the presence of new investors will encourage the growth of Islamic finance. Islamic banking consultant, Adiwarman Azwar Karim, argues, among other things the development of Islamic banking will be marked issuance of bonds or sukuk Islamic-based government that is prepared.

A number of foreign banks in Indonesia, such as Citibank and HSBC, even preparing for the issuance of sukuk by opening a sharia business unit. Meanwhile, a number of investors from the Gulf states are also preparing to buy banks in Indonesia to be converted into Islamic banks. The criteria selected banks with assets generally relatively small, between Rp 500 billion and Rp 2 trillion. Once converted, these banks sought syndicate financing large projects, involve global financial institutions.

a.       The determination of the risk for the results at the time the contract was made with reference to the possibility of profit and loss

b.      The amount of profit sharing ratio based on the amount of profits

c.       Number of shares increased revenue sharing in accordance with the increase in the number of income

d.      There is no doubt a boon for results

e.       For results depend on the benefits of the projects being undertaken. If the project does not benefit then the loss will be shared by both parties