Mudharabah and Musyarakah Financing in Indonesian Islamic Banking Practices: Is It Equity or Debt Financing?
Keywords:
Islamic Banking, Mudharabah, Musyarakah, Equity Financing, Debt Financing
Abstract
The purpose of this paper is to examine whether Mudharabah and Musyarakah financing from Islamic banks in Indonesia is capital or debt financing, based on legal, accounting, and fiqh perspectives. To achieve this goal, a review is carried out on laws, Sharia Accounting Standards, MUI and DSN Fatwas, the Al Quran and Hadith, articles, the Financial Reports of Islamic Banks in Indonesia, and other relevant documents. This study concludes that the law as stipulated in Act No. 21 of 2008 limits Islamic banking operational activities only to the financial sector, and it is almost impossible to implement in a real economy. The current provision does not allow Islamic banking to act as an investor in a mudharabah contract or as an asset owner in a musyarakah contract. This is confirmed in the financial reports of Islamic banks, which do not report mudharabah financing and musyarakah financing as investments. In addition, in practice, Contract musyarakah cannot stand on its own but must be carried out in a multi-contract (hybrid) manner. Even though the Prophet had forbidden the practice of two contracts in one transaction. On the other hand, in distributing financing, banks do not have a sharia contract basis to act as shaibul mal. The bank's status as Al-Wakil or Mudharib does not justify it changing its status to Shahibul Mal when disbursing funds. As a result, the Contract of mudharabah and musyarakah financing carried out by banks with customers as mudharib becomes void.
References
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Agustin, H., Hariswanto, H., & Bustamam, N. (2018). The effect of nonperforming financing mudharabah and musyarakah and ownership of banks on the profitability of sharia banks. Jurnal Tabarru': Islamic Banking and Finance, 1(2), 33-45. https://journal.uir.ac.id/index.php/tabarru/article/view/2814
Al-Khayyath, Abdul Aziz. (1982). Syarîkât fî asy-Syarî'ah al Islâmiyyah wa al Qânûn al-Wâdh'i. Mua'ssasah ar-Risalah, Beirut, Lebanon.
An Nabhani, T. (2004). Nidzamul Iqhtishadi fi Islam. Beirut: Darul Ummah.
Arsyadona, A., Siregar, S., Harahap, I., & Ridwan, M. (2019). The effects of mudharabah and musyarakah financing on the profitability of sharia commercial banks in Indonesia. Proceeding International Seminar of Islamic Studies, 1(1), 682-689. https://jurnal.umsu.ac.id/index.php/insis/article/view/4234
Atkinson, P.A., & Coffey, A.J. (2011). Analyze the reality of documents. In Qualitative Research (pp. 56–75).
Bank Indonesia. Indonesia Economic and Financial Statistics 2022. Retrieved from https://www.bi.go.id/id/statistik/ekonomi-keuangan/seki/Pages/SEKI-FEBRUARI-2023.aspx
Corbin, J., & Strauss, A. (2008). Fundamentals of qualitative research: techniques and procedures for developing grounded theory (3rd ed.). Thousands of Oaks.
Farooq, M. O. (2007). Partnership, equity-financing and Islamic finance: whither profit-loss sharing?. Review of Islamic Economics (Special Issue), 11, 67-88. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1415239
Financial Services Authority. (2023). Book of Sharia Banking Statistics Feb. 2023. Retrieved from https://www.ojk.go.id/id/kanal/syariah/data-dan-statistik/statistik-perbankan-syariah/Pages/Statistik-Perbankan-Syariah---Februari-2023.aspx
Indonesian Council of Ulama. Fatwa No. 1 of 2004 concerning Interest. Retrieved from //efaidnbmnnnibpcajpcglclefindmkaj/https://nuris2006.files.wordpress.com/2014/01/hukum-bunga_fatwa-mui-januari-2004.pdf
Jais, M., Faizah S., Asmaou M.B. (2019). Mudarabah and Musharakah as an Equity Financing Model: Issues in Practice. Proceedings of the 2nd Aceh Global Conference on Business Economic and Sustainable Development Trends (AGC-BEST) 2019, October 17-18, 2019 (pg. 107-114). Banda Aceh, Indonesia. Universitas Syiah Kuala.
Karim, A.A. (2000). Incentive Compatible Constrains for Islamic: Banking Some Lessons From Bank Muamalat. Conference Papers, Fourth International Conference on Islamic Economics and Banking, August 13-15, 2000, (pp 579-598). UK: Loughborough University.
Kayed, R.N. (2012), The entrepreneurial role of profit‐and‐loss sharing modes of finance: theory and practice. International Journal of Islamic and Middle Eastern Finance and Management, 5(3), 203-228. doi:10.1108/17538391211255205
Law No. 10 of 1998 concerning Amendments to Law Number 7 of 1992 concerning Banking. Retrieved from https://peraturan.bpk.go.id/Home/Details/45486/uu-no-10-tahun-1998
Law No. 21 of 2008 concerning Sharia Banking. Retrieved from https://www.ojk.go.id/id/kanal/perbankan/regulasi/undang-undang/Pages/undang-undang-nomor-21-tahun-2008-tentang-perbankan-syariah.aspx
Law No. 7 of 1992 concerning Banking. Retrieved from https://peraturan.bpk.go.id/Home/Details/46599/uu-no-7-tahun-1992
Mansori, S., Kim, C. S., & Safari, M. (2015). A Shariah Perspective Review on Islamic Microfinance The Predictive Effect of Positive Emotion on the Individual Work Performance In Banking Industry In Malaysia View project Intrapreneurial Behavior and Individual Characteristics View project A Shariah P. Asian Social Science, 11(9), 1-8.
Mia, M. R., Hasnat, M. A., & Mahjabeen, W. (2016). Mudharabah and musharakah from the accounting perspective by referring to AAOIFI, IFRS, and MFRS. IOSR Journal of Business and Management, 18(7), 67-72. doi: 10.9790/487X-1807036772
National Sharia Council. Fatwa No. : 07/DSN-MUI/IV/2000 Concerning Mudharabah Financing (Qiradh). Retrieved from https://tafsirq.com/fatwa/dsn-mui/pembiayaan-mudharabah-qiradh
National Sharia Council. Fatwa No. 73/DSN-MUI/XI/2008 Concerning Musyarakah Mutanaqisah. Retrieved from https://tafsirq.com/fatwa/dsn-mui/musyarakah-mutanaqishah
PT. Bank Syariah Indonesia Tbk. (2022). Financial Report 2021. Retrieved from://efaidnbmnnnibpcajpcglclefindmkaj/https://ir.bankbsi.co.id/newsroom/PT_Bank_Syariah_Indonesia_Tbk_31_Dec_22.pdf
Sadique, M. A. (2009). Essentials of Musharakah and Mudarabah: Islamic texts on the theory of partnership. Kuala Lumpur, Malaysia: IIUM Press.
Sharia Accounting Standards Board. (2016). Islamic Financial Accounting Standards. Indonesian Accountants Association.
Triono, D.C. ( 2020). Sharia Market Economy. Yogyakarta, Indonesia: Irtikaz
Yusof, A. A. (2017). Shariah Standards & Operational Requirement. (PDF file). Retrieved from https://islamicbankers.files.wordpress.com/2017/09/shariah-standards-mia-280917-final.pdf
Yustiardhi, A. F., Diniyya, A. A., Faiz, F. A. A., Subri, N. S., & Kurnia, Z. N. (2020). Issues and challenges of the application of Mudarabah and Musharakah in Islamic bank financing products. Journal of Islamic Finance, 9(2), 26-41.
Published
2024-02-22
How to Cite
Purnomo, B., Nasim, A., Besar, M., & Suryadi, E. (2024). Mudharabah and Musyarakah Financing in Indonesian Islamic Banking Practices: Is It Equity or Debt Financing?. Islamic Research, 7(1), 14-22. https://doi.org/https://doi.org/10.47076/jkpis.v7i1.232
Section
Islamic Economics and Finance
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