Bank interest and syaria

Bank interest and syaria

From Tempo

As the polemics on the ruling made by the Council of Indonesian Ulema (MUI) that bank interests are forbidden according to the Islamic law are intensifying, I have been prompted to comment as follows:

I know for sure that MUI has competent people who are very knowledgeable about the Islamic law, especially in relation to economic matters. In fact, a similar ruling was also made earlier in other parts of the world (at the Mu'tamar al-Fiqh al-Islam in Paris in 1951, in Cairo in 1965 and at the conferences of the Organization of Islamic Conference (OIC) in 1985 and 1986.

Regarding a bank interest, the crux of the matter lies in the entire banking process, involving how the fund is exploited, where it is channeled and to whom it is lent. An interest is only the end result of this process. God will not consider only the end result but will take into account the entire process.

When you deposit your money in a bank, you generally do not know how the bank makes use of your money. What you know is that you get an interest at the end of a month. When it comes to depositing money in a bank, what counts to a good Muslim is to know exactly his or her money will be used in conformity with the Islamic law.

Indeed, it is the job of the MUI to announce what is forbidden by the Islamic law and what is not. Then it all depends on each Muslim individual whether or not to comply with this ruling.

In this context, there is fear that over Rp 80 trillion will be withdrawn from conventional banks and transferred to Islamic- law-based banks (syaria banks). As there are only two such banks in this country plus several syaria units of some commercial banks, it is also feared that these syaria banks and units will not be able to absorb this huge fund. This fear is indeed groundless. The huge funds can in fact be channeled to small and medium-sized companies as they usually find it hard to obtain loans from commercial banks.

It should be borne in mind that between 1998 and 2002, when conventional/commercial banks needed the central bank's liquidity support funds (BLBI) for their survival, syaria banks proved to be invulnerable to the ongoing economic and monetary crisis and needed no BLBI.

ACHMAD HARUN Jakarta