Legal Justice in Sharia Financing for MSMEs: Theory vs Reality

MSMEs are a main pillar of the Indonesian economy, absorbing labour and driving economic growth. Amid limited access to capital, sharia financing presents itself as an alternative promising justice, partnership, and sustainability. However, to what extent does the reality of sharia financing for MSMEs reflect the values of justice taught in theory and the Qur’an? This article examines the gap between idealism and facts on the ground.

In theory, sharia financing is built on principles of justice (al-’adl), transparency (ash-shiddiq), and compliance with the prohibitions of riba (usury), gharar (uncertainty), and maysir (speculation). These principles require a balance of rights and obligations between the capital provider and the business manager, avoiding exploitative practices. The Qur’an explicitly commands justice in economic activities, as stated in QS An-Nahl verse 90, which instructs believers to act justly and do good. QS An-Nisa verse 29 prohibits consuming each other’s wealth unjustly, except through trade based on mutual consent, while QS Ar-Rahman verse 9 symbolises the importance of honesty and proportionality in every transaction.

Despite these strong theoretical and spiritual foundations, the practice of sharia financing for MSMEs still leaves serious problems. The dominance of murabahah contracts (sale with a margin) in financing portfolios makes sharia products substantively difficult to distinguish from conventional interest-based loans. Furthermore, weak oversight by Sharia Supervisory Boards (DPS) means violations of sharia principles often go undetected and uncorrected. MSME customers also frequently face opaque and burdensome mechanisms for determining fees and mandatory deposits. Compounding this, low sharia financial literacy among MSME actors makes them vulnerable to being disadvantaged in financing contracts. From a regulatory perspective, the Financial Services Authority (OJK) regulations on sharia financing are considered too general and have not strongly integrated sharia principles with adequate supervision. Culturally, there remains a tendency to view sharia financing merely as an alternative product with an Islamic label, rather than a system carrying a transformative justice paradigm. As a result, the spirit of partnership is eroded by a pragmatic business approach oriented towards short-term profit.

To achieve authentic justice, several strategic steps are needed. First, strengthening regulations that firmly integrate maqasid al-shariah (the objectives of Islamic law), mandate sharia audits, ensure the independence of Sharia Supervisory Boards, and impose strict sanctions for violations. Second, improving sharia financial literacy among MSME actors through intensive education and training. Third, encouraging product innovation based on profit-sharing (mudharabah and musyarakah) and developing sharia fintech that is fairer because risks and profits are shared. Fourth, strengthening the role of government, academia, and civil society in overseeing implementation to ensure it is substantive, not merely procedural.

In conclusion, sharia financing has great potential to realise economic justice as taught in the Qur’an. However, a clear gap between theory and reality remains, stemming from the dominance of less equitable contracts, weak supervision, low literacy, and suboptimal regulation. Moving forward, the implementation of sharia financing for MSMEs must be oriented towards substantive justice, not just formal compliance. Through synergy between regulators, sharia financial institutions, and MSME actors, the ideal of a just Islamic economy can be realised.