MUI commission bans bank interest

MUI commission bans bank interest

Dadan Wijaksana and A. Junaidi, The Jakarta Post, Jakarta

The Indonesian Ulemas Council (MUI) Edict Commission said on
Tuesday that it had agreed to declare interest on money as riba,
which is forbidden under Islamic law, but MUI deputy chairman Din
Syamsuddin said that the edict was not final.

Ma'ruf Amin, chairman of the MUI Edict Commission, said that
the commission had decided to prohibit the application of
interest in financial institutions such as banks, insurance
companies, pawn houses, and cooperatives.

"We agreed that the interest is the same as the practice of
riba which was haram (prohibited) during the era of Prophet
Muhammad," Ma'ruf told reporters on the sidelines of a MUI
meeting here.

Ma'ruf said MUI would prohibit Muslims from using conventional
banks once sharia banks were already operating in their area.

"We consider the current situation an emergency, so Muslim
people are still allowed to use conventional banks. Someday, if
the number of sharia banks is already adequate, we may prohibit
Muslims from using conventional banks," he said.

Ma'ruf, who is also a deputy chairman of the country's largest
Muslim organization Nahdlatul Ulama (NU)'s lawmaking body, denied
suggestions that the edict was aimed at helping sharia banks
attract customers from conventional banks, amid the current tough
competition among banks.

MUI deputy chairman Din Syamsuddin, however, said that the
commission's decision on interest was not final.

"It's not yet final. We, the chairmen and deputy chairmen,
will hold a meeting soon to discuss the issue," Din, who is also
deputy chairman of the country's second largest Muslim
organization Muhammadiyah, told reporters before attending the
closing ceremony of the national gathering.

He stressed that the MUI leadership would consider opinions
from other Muslim organizations, including NU and Muhammadiyah,
before deciding whether to ban bank interest or not.

NU and Muhammadiyah as organizations had earlier said that
bank interest was not forbidden as it was different from the
practice of riba during Prophet Muhammad's era.

NU owns Nusumma Bank, while Muhammadiyah manages Bank
Persyarikatan; both apply interest.

Meanwhile, Vice President Hamzah Haz said on Tuesday that the
edict was not binding.

"We leave it all to the people. Muslims who consider the
interest of conventional banks unacceptable can go to sharia
banks. It is no problem because it (the edict) is not binding,"
Hamzah was quoted by detik.com as saying.

Hamzah, who is also chairman of Muslim-based United
Development Party (PPP), argued that bank interest could not be
banned as it had been applied universally.

Meanwhile, bankers regretted on Tuesday the decision of the
MUI Edict Commission to ban bank interest as it could hurt the
banking sector.

Sigit Pramono, the newly appointed president of Bank Negara
Indonesia (BNI) 1946, said that such a move could deal a huge
blow to the banking sector, which has not fully recovered from
the crisis in the late 1990s.

Sigit suggested that the country's highest Islamic body
coordinate with Bank Indonesia as the sole agency overseeing the
country's banking sector.

"MUI indeed has the authority to declare something haram. But,
coordination with BI will be the key in this regard," Sigit said,
while urging also that if the plan is to go ahead, alternatives
must be provided.

Another banker, Jahja Setiaatmadja, a director of Bank Central
Asia (BCA), told The Jakarta Post that the move was poorly timed.

Not only could it slow down the pace of recovery in the
banking sector, it could also backfire considering the limited
network and number of sharia banks the country has at the moment,
Jahja added.

Three years ago, MUI issued a similar declaration, but it had
little impact on the banking practices. However, the edict is
expected to encourage conventional banks to open Islamic bank
units.