Understanding 'Syariah' banking
Understanding 'Syariah' banking
Perbankan Syariah, Perspektif Praktisi; (Syariah Banking,
Perspective of the Practitioner); Written by the Muamalat
Institute; Published by the Muamalat Institute, November 1999;
xiii and 162 pages
Why is Syariah banking, (based on Islamic law), so unpopular
in Indonesia, home to the world's largest Muslim population? As
well as related to differences in interpreting Islamic law, and
the fact that Syariah banking is not expressly condoned in the
Koran, it is also because this form of banking, only appearing at
the end of the 1970s, is still relatively new, and -- more
importantly -- more complex than conventional banking practices.
Differences in interpretation are one clear reason for the
limited response. But this excuse will not hold water forever.
Another factor is socialization. It must be admitted that the
socialization of this form of banking has, up to now, been
limited, whether through campaigns or through the dissemination
of comprehensive information about Syariah banking.
In fact, the latter reason was well understood by Bank
Muamalat Indonesia (BMI), the pioneer of the Syariah banking
system in Indonesia. BMI realized that many of its prospective
customers clearly had no idea that Syariah banking was in many
ways no different from conventional banks and other financial
institutions with respect to its products.
In fact, for sheer variety of products and services, Syariah
banking compares very favorably with average conventional banks.
But because it is based on a bagi hasil (profit sharing) system,
the nature of these products and services differs. What is more,
they are more complex. This is why prospective customers need
practical information about these products.
In its book Perbankan Syariah: Perspektif Praktis, BMI
attempts to describe in practical but comprehensive terms the
different products and service it offers. There are sections on
definition, an explanation of Islamic law, regulations and
practices, banking technicalities and accounting. In this way,
the "strange" terms used are no longer an obstacle to
understanding Syariah banking.
However, it must be said that these books have given rise to a
widespread belief that the practicalities of Syariah banking are
more complicated than conventional banking. (What is meant here
is a general bank, rather than investment bank or a mutual fund.)
And, because Syariah banking not only deals with banking
operations but also the implementation of universal Islamic
teachings and practice, books dealing with practical aspects
alone are clearly insufficient.
It is interesting to note that because the book was published
soon after Regulation No. 10, 1998, which enabled other banks in
Indonesia to practice this form of banking, and the onset of the
economic crisis, which forced tens of national banks -- which
work on the interest principle -- into receivership or
bankruptcy, this book found a ready audience.
The main idea behind Syariah banking -- that of sharing risks
and profits -- enabled the bank to weather the storm in a way
that conventional banks could not. This is all too apparent from
the huge debt burdens that many traditional banks now face, and
the huge difficulties faced by companies in obtaining creditable
sources of funding from within the banking sector. Taufik