Small-scale business ignore Islamic bank edict

M. Taufiqurrahman, The Jakarta Post, Jakarta

Some small-scale businesspeople expressed on Thursday indifference to the proposed Indonesian Ulemas Council (MUI) edict that prohibits bank interest, saying such an instruction might hamper business.

Rubiono, who runs a shop selling wooden window and door frames on Jl. Pejompongan in Central Jakarta, said what really mattered most for businesspeople like him was easy access to funds, regardless of the interest applied by either banks, pawn houses or cooperatives.

"Most of the shop owners here are devout Muslims, yet they obtain credit with a monthly interest of 25 percent from local cooperatives and we don't feel sinful about it," Rubiono, who has been on the haj pilgrimage, told The Jakarta Post.

"God knows we run a decent and fair business to earn a living for our children," he added.

Despite the high interest rate, he said, the cooperatives provide easier access to obtain loans compared to conventional banks or its sharia units that apply redundant procedures.

He added he had not been able to obtain a loan from sharia banks although he had submitted many proposals to them.

On Tuesday, MUI's Edict Commission announced a prohibition on the payment of interest on deposits and loans involving financial institutions such as banks, insurance companies, pawnbrokers and cooperatives, declaring it as riba (usury), which is forbidden under Islamic law.

The proposed edict, although non-binding, has sparked criticism, with bankers saying the ban could hurt the banking sector.

The commission also called on Muslims to use sharia banks. Some analysts accused executives of sharia banks of having a hand in cooking up the edict.

Muslim businesswoman Ika Kartika, who runs 13 textile shops in Tanah Abang textile market, Central Jakarta, said she saved money in conventional banks, because of the security offered and not for the interest.

"It is simply because the banks take care of my money in the safest possible way," she told the Post.

She said that it should be up to Muslim bank customers to decide whether they would use the service of conventional or sharia banks.

"Those who consider the interest applied by conventional banks unlawful according to Islamic teachings can always go to sharia banks," she said.

To help boost her textile business after a fire that had ravaged the market earlier this year, she took out a Rp 800 million (US$94,000) loan from a state-owned bank without having to go through complicated procedures.