Compliance with Sharia Principles in Property Business in Indonesia: An Analysis of Murabahah Contracts in Sharia Bank Mortgages

  • La Ode Mahmud Department of Business Administration, Faculty of Social and Political Sciences, Halu Oleo University, Kendari, Indonesia
  • Iskandar Pattih Department of Business Administration, Faculty of Social and Political Sciences, Halu Oleo University, Kendari, Indonesia
  • Bakti Bakti Department of Business Administration, Faculty of Social and Political Sciences, Halu Oleo University, Kendari, Indonesia
  • Wa Ode Harliyanti Unga Department of Business Administration, Faculty of Social and Political Sciences, Halu Oleo University, Kendari, Indonesia
  • Abdallah Elmabgoul Department Business Administration, Faculty of Business Studies, Sudan University of Science and Technology, Khartoum, Sudan
DOI: https://doi.org/10.47076/jkpis.v7i2.295
Keywords: Sharia compliance, Murabahah, Homeownership loans, Sharia banks

Abstract

Abstract

This study aims to evaluate the implementation of the Murabahah contract in Home Ownership Loans (KPR) by Islamic banks in Indonesia against Sharia principles. A qualitative analysis revealed that while the Murabahah contract is widely used, several practices do not fully comply with Sharia principles. These non-compliant practices include schemes resembling riba, selling products not yet owned, and inconsistencies in project management by Islamic banks. The findings indicate that adherence to Sharia principles significantly impacts customer trust and satisfaction, thereby affecting customer loyalty to Islamic banks. The study highlights the necessity for increased supervision and stricter application of Sharia principles in property transactions. The Sharia Supervisory Board (DPS) and transparency in reporting are crucial for maintaining integrity and trust in Islamic financial institutions. This research significantly contributes by identifying areas requiring improvement to ensure full compliance with Sharia principles in the property business, providing a solid foundation for developing Sharia-compliant property business practices.

References

AbdulKareem, I. A., Elaigwu, M., & Shola, A.-T. I. (2021). The role of risk management, sustainability disclosure practices, and Islamic finance in Nigeria business environment. The Journal of Management Theory and Practice (JMTP), 89–96.

Ahmed, E. R., Islam, M. A., Alabdullah, T. T. Y., & Amran, A. B. (2019). A qualitative analysis on the determinants of legitimacy of sukuk. Journal of Islamic Accounting and Business Research, 10(3), 342–368.

Albarrak, H., & El-Halaby, S. (2019). AAOIFI governance standards: Sharia disclosure and financial performance for Islamic banks. Journal of Governance & Regulation, 8(1), 19–37.

Ariwibowo, P. (2023). Sharia economic transaction academic effectiveness on the level of community well-being. Malia (Terakreditasi), 14(2), 235–254. https://doi.org/10.35891/ml.v14i2.3760

Arshed, N., Yasmin, S., & Gulzar, M. F. (2020). Islamic financing portfolio and its comparative growth potential. Islamic Banking and Finance Review, 7. https://doi.org/10.32350/ibfr/2020/0700/440

Arwani, A. (2018). Issues and challenges of shariah auditing in Islamic financial institution and corporate governance compliance. Media Riset Akuntansi, Auditing & Informasi, 18(2), 169–186.

Azoitei, D. C. (2020). Critical analysis of the contemporary application of riba in Islamic banking. J. Int’l L. Islamic L., 16, 76.

Che Azmi, A., & Hanifa, M. H. (2015). The Sharia-compliance of financial reporting practices: A case study on waqf. Journal of Islamic Accounting and Business Research, 6(1), 55–72.

El-Hawary, D., & Grais, W. (2004). Regulating Islamic financial institutions: The nature of the regulated (Vol. 3227). World Bank Publications.

Fauzi, A. A., & Suryani, T. (2019). Measuring the effects of service quality by using CARTER model towards customer satisfaction, trust and loyalty in Indonesian Islamic banking. Journal of Islamic Marketing, 10(1), 269–289. https://doi.org/10.1108/jima-04-2017-0048

Gani, I. M., & Bahari, Z. (2021). Islamic banking’s contribution to the Malaysian real economy. Isra International Journal of Islamic Finance, 13(1), 6–25. https://doi.org/10.1108/ijif-01-2019-0004

Haron, R., Abdul Subar, N., & Ibrahim, K. (2020). Service quality of Islamic banks: Satisfaction, loyalty and the mediating role of trust. Islamic Economic Studies, 28(1), 3–23.

Haryanto, R., Al Jufri, E. A. N., & Ahmad, A. A. (2023). The service quality, corporate image, satisfaction, and loyalty: A study of Sharia banks in rural areas during COVID-19. Al-Uqud: Journal of Islamic Economics, 7(2).

Ilias, I. @. I., Nasrun, M., & Muhamed, N. A. (2022). Appraising legal and regulatory framework for personal financing offering by Islamic banks and non-bank institutions in Malaysia. International Journal of Academic Research in Accounting Finance and Management Sciences, 12(2). https://doi.org/10.6007/ijarafms/v12-i2/13922

Iswanaji, C., Muslim, A., & Hasbi, M. Z. N. (2022). Ijarah collaborative service model in Sharia banking. Indonesian Interdisciplinary Journal of Sharia Economics (Iijse), 5(2), 702–719. https://doi.org/10.31538/iijse.v5i2.1778

Kartika, T. P. D., & Aprilianita, R. (2022). Interaction of ethics and understanding of auditor information systems in determining audit quality. Ijebd (International Journal of Entrepreneurship and Business Development), 5(6), 1105–1113. https://doi.org/10.29138/ijebd.v5i6.2057

Kurniawan, M. R., Anggraeni, S. T., & Hasanah, U. (2024). The problem of akad murabahah in Sharia banks: Between profit-oriented and Sharia compliance. Demak Universal Journal of Islam and Sharia, 2(01), 55–66.

Latifah, I. N., Suhendra, A. A., & Mufidah, I. (2023). Factors affecting job satisfaction and employee performance: A case study in an Indonesian Sharia property companies. International Journal of Productivity and Performance Management, 73(3), 719–748. https://doi.org/10.1108/ijppm-03-2021-0132

McMillen, M. J. (2022). Islamic finance to enhance business opportunities: Private investment. In Contemporary Issues in Islamic Law, Economics and Finance (pp. 149–169). Routledge.

Prabowo, B. A. (2020). Reputation oversight by the Sharia Supervisory Board toward Wakalah contract application on Murabahah financing. 775–781.

Sayuti, K. M., Amin, H., Razak, D. A., & Rizal, H. (2020). Receptiveness of Islamic home financing among Malaysians: A revisit. International Journal of Business and Society, 21(2), 784–802. https://doi.org/10.33736/ijbs.3294.2020

Setiawan, R. A. (2022). Risk and regulation of Islamic banks: The Indonesian experience.

Sup, D. F. A. (2023). The analysis of Sharia compliance in the implementation of KPR Syariah iB Hebat product at BPRS Dana Amanah Surakarta. Journal of Islamic Economics Lariba, 9(2), 269–292. https://doi.org/10.20885/jielariba.vol9.iss2.art1

Widityani, S. F., Faturohman, T., Rahadi, R. A., & Yulianti, Y. (2020). Do socio-demographic characteristics and Islamic financial literacy matter for selecting Islamic financial products among college students in Indonesia? Journal of Islamic Monetary Economics and Finance, 6(1). https://doi.org/10.21098/jimf.v6i1.1057

Witasari, A. (2020). The role of the Sharia Supervisory Board in the framework enforcing Sharia principles at the Institute of Islamic Banking in Semarang. The 2nd Proceeding “Indonesia Clean of Corruption in 2020”.

Yuli, S. B. C., & Rofik, M. (2023). Implications of Sharia-compliant financing trade-offs on unemployment and growth. Public and Municipal Finance, 12(1), 100–109. https://doi.org/10.21511/pmf.12(1).2023.09

Zaki, I. (2023). Improving Sharia financial inclusion through advancements in technology and compliance with Sharia principles. Iqtishadia Jurnal Kajian Ekonomi Dan Bisnis Islam, 16(1), 146. https://doi.org/10.21043/iqtishadia.v16i1.22116
Published
2024-10-22
How to Cite
Mahmud, L., Pattih, I., Bakti, B., Unga, W. O., & Elmabgoul, A. (2024). Compliance with Sharia Principles in Property Business in Indonesia: An Analysis of Murabahah Contracts in Sharia Bank Mortgages. Jurnal Kajian Peradaban Islam, 7(2), 255-259. https://doi.org/https://doi.org/10.47076/jkpis.v7i2.295
Issue
Vol 7 No 2 (2024): Islamic Research
Section
Islamic Economics and Finance
Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Copyright

  1. The Author and each co-authors transfer the copyright and grant the journal right of publication with the work simultaneously licensed under an International Creative Commons Attribution and ShareAlike 4.0 License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
  2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
  3. Authors should sign copyright transfer agreement when they have approved the final proofs sent by ISLAMIC RESEARCH prior the publication.

 Author Guarantee

  1. The Author (Co-authors) guarantees that the Materials are an original work, submitted only to ISLAMIC RESEARCH, and have not been published previously.
  2. In case the Materials were written jointly with Co-authors, the Author guarantees that he/she has informed them of the terms of this Agreement and obtained their signatures or written permission to singe on their behalf.
  3. The Author guarantees as well that:
  • The Materials do not contain libelous statements.
  • The Materials do not infringe on other persons' rights (including without limitation copyrights, patent rights and the trademark right).
  • The Materials do not contain facts or instructions that can cause damage or injury to third parties and their publication dose not cause the disclosure of any secret or confidential information

 ISLAMIC RESEARCH is Published by Perhimpunan Intelektual Muslim Indonesia, and licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Copyright ©2022.