The Operational System of Islamic Banks: A Different Philosophy, Not Just a Different Name

The operational system of Islamic banks is contextually built on a very different foundation from conventional banks. Instead of interest (riba), Islamic banks use profit-sharing schemes (mudharabah, musyarakah), sale and purchase (murabahah, salam, istishna), and leasing (ijarah). This principle should lead to profound operational consequences: the bank is not merely an interest-based lender, but a genuine partner who shares risk with the customer.

Unfortunately, in daily practice, many parties, including some academics and practitioners, assess that products like murabahah have become dominant precisely because their nature is similar to conventional credit. This is not a disgrace to be hidden, but a reality that needs to be discussed openly, as the dominance of murabahah indicates that the operational system of Islamic banks still leans towards risk minimisation rather than the courage to bear risk equally, as the original spirit of mudharabah and musyarakah demands.

Another distinguishing operational element is the existence of the Sharia Supervisory Board (DPS), tasked with ensuring all products and transactions comply with fatwas and Sharia principles. This is a structurally excellent mechanism that conventional banks do not possess. However, the effectiveness of the DPS in many banks remains a subject of discussion. The workload of the DPS, which must oversee hundreds to thousands of products and contracts, coupled with limited membership and part-time working hours, raises concerns that supervision is more of an administrative formality than a substantive review of each contract. If left unaddressed, public trust in the ‘Sharia label’ could erode, as society ultimately judges Islamic banks not by their certification alone, but by the real experience of transacting.

From a technical operational perspective, Islamic banks also face efficiency challenges compared to conventional banks. Information technology systems must be designed to support complex Sharia contracts, such as dynamic profit-sharing calculations or asset recording in ijarah schemes, requiring more intricate system development than simple interest-based systems. Consequently, the operational costs (cost of funds and overhead) of Islamic banks tend to be higher, making their margins and product pricing less competitive than conventional banks.

Another operational aspect that is often overlooked is the readiness of human resources. Many employees of Islamic banks come from conventional banking backgrounds and receive only brief training on Sharia principles. This risks causing miscommunication to customers regarding the contracts used, and even potentially leading to practices that, in substance, resemble interest but are wrapped in Sharia terminology—a phenomenon often criticised as hiyal (legal stratagems).

In essence, the operational system of Islamic banks holds great potential to offer a fairer financial system, one that places the bank and customer as equal partners rather than merely a debtor-creditor relationship wrapped in different terms. To realise this, several steps need attention: strengthening the capacity and independence of the Sharia Supervisory Board so that supervision is substantive, not just an administrative formality; regulatory encouragement and incentives from authorities for banks to increase profit-sharing based financing, rather than continuously relying on murabahah which minimises risk; serious investment in technology and systems specifically designed to meet the complexity of Sharia contracts, so that operational efficiency can be improved without sacrificing principles; and continuous education and training of human resources, not just as a certification formality, so that every employee truly understands the philosophy behind each contract offered. Without the courage to conduct such evaluation and reform, Islamic banking risks becoming merely a conventional bank dressed in Arabic terms.