Muhammadiyah cool on Islamic bank edict

Sri Wahyuni, The Jakarta Post, Yogyakarta

Muhammadiyah chairman Ahmad Syafii Maarif called on Muslims on Wednesday to play down an edict that bans bank interest and suggested that they continue using conventional banks.

Syafii, who leads the country's second largest Muslim organization, said the issue of bank interest remained controversial even among ulemas.

"As an opinion, an ijtihad (individual interpretation or judgment), we appreciate the edict. But, I think it was hastily formulated as there has been no agreement among ulemas regarding the issue," Syafii told reporters at Muhammadiyah headquarters here.

The Edict Commission of the Indonesian Ulemas Council (MUI) announced a ban on Tuesday on the payment of interest on deposits and loans involving financial institutions such as banks, insurance companies, pawnbrokers and cooperatives, saying it resembled the practice of riba that was haram (prohibited) during the era of the Prophet Muhammad.

The commission also said it would ban Muslims from using conventional banks once sharia banks were operational, but conventional banks would be accepted in areas where sharia banks were absent.

Syafii, however, said that the edict could not work in that way as most of the sharia banks operating in the country were managed by conventional banks.

"This is actually a classic issue. It has been around for years. There was a similar edict in the past, but it proved unworkable," he said.

Syafii, therefore, suggested that Muslims remain calm in response to the issue, quoting the opinion of a prominent ulema who said that bank interest was not haram as long as there was no riba practice involved.

"The law on riba is very, very clear. It's haram and will stay that way until the end of the world. But, the question is, is bank interest with no element of exploitation also to be considered as riba?" said Syafii, adding that he would ask Muhammadiyah's Tarjih (supervisory) Commission to further study the matter.

Syafii also expressed support for the operation of what are termed "Islamic" banks in the country, provided that they were able to serve the needs of modern society.

"It hasn't happened yet, has it?" Syafii asked.

He said the assets of the banks currently using the Islamic label accounted for only some 0.6 percent of the total assets held by the country's banks, with the rest being controlled by conventional banks.