The Implementation of Musharakah Financing in Indonesia; a Legal Regulatory Perspective

  • Authors

    • Gunawan Widjaja
    2018-11-26
    https://doi.org/10.14419/ijet.v7i4.29.21589
  • Musharakah Financing, Regulatory Perspective
  • Since the inauguration of Law No.21 Year 2008 re. Shariah Banking, the assets of shariah banking has grown to 267.944 billion Rupiah in August 2017. It meant that it is not only important to make a good and sound regulation on shariah banking but also its implementation according to the shariah banking concept. One among them is musharakah financing. Therefore the regulation and implementation of musharakah financing in Indonesia must comply with the concept of shariah banking. This research tried to find out whether the implementation of Musharakah in Indonesia according to the legal and regulatory perspective had complied with the shariah banking concept. This research is a normative legal research. It used secondary data, which included primary legal sources, secondary legal sources and tertiary legal sources. Data were collected through literature review and analysis was conducted using qualitative approach. Findings showed that many regulations and guidance on shariah banking had been issued by the relevant competent authority in Indonesia, the Indonesian Financial Authority Body (Otoritas Jasa Keuangan (OJK)) and the Indonesia National Shariah Council (Dewan Syariah Nasional (DSN)). However, researcher found that none of the regulations, as well as the Shariah Banking Law that provided clear regulations on the concept and implementation of musharakah financing in Indonesia. Only in 2015, OJK has issued OJK Guideline that provided an implementation guidelines for musharakah financing in Indonesia. Analysis through the OJK Guideline compared to the concept of shariah banking musharakah financing itself indicated that there was deviation the implementation of musharakah financing in Indonesia from shariah banking concept. The deviation came in form of security granted to secure the full repayment of the financing to the Banks. Finally the researcher also provided recommendation to improve the implementation of musharakah financing in Indonesian banking system.

  • References

    1. [1] Ahinful, G. S., Addo, S., Boateng, F. O., & Boakye, J. D. Accounting Ethics and the Professional Accountant: The Case of Ghana. International Journal of Applied Economics, Finance and Accounting, 1(1), 30-36,(2017).

      [2] Ali, Salman Syed and Ausaf Ahmad (Ed). Islamic Banking and Finance: Fundamentals and Contemporary,(2007).

      [3] Ekpung, E. G. Public infrastructure spending and economic growth in Nigeria: An Error Correction Mechanism (ECM) approach. Journal of Social Economics Research, 1(7), 129-140, 2014..

      [4] Arshad, Noraziah Che Arshad and Abdul Ghafar Ismail “Shariah parameters for Musharakah Contract: A commentâ€. International Journal of Business and Social Science. Vol. 1 No. 1; October ,(2010).

      [5] Cerovic, Ljerka, Stella Suljic Nikolaj, and Dario Maradin “Comparative Analysis of Conventional Anf Islamic Banking: Importance of Market Regulation.†Comparative Ekon, Misao I Praksa DBK, God XXVI, Br 1, 241-263,(2017).

      [6] Durán, Juan-José and María-José García-López. “The Internationalization of Islamic Banking and Finance: The Co-Evolution of Institutional Changes and Financial Services Integration.†International Journal of Business and Management;Vol.7,No.13,49-74,(2012). http://dx.doi.org/10.5539/ijbm.v7n13p49

      [7] Ekpete, M. S., & Iwedi, M. Financial Intermediation Functions of Microfinance Banks in Nigeria: A Vector Autoregressive and Multivariate Approach. International Journal of Economics and Financial Modelling, 2(1), 7-24,(2017).

      [8] Ethica. Ethica’s Handbook of Islamic Finance. Dubai: Ethica Institute of Islamic Finance ,(2013).

      [9] Hassan, M. Kabir and Mervyn K. Lewis (Ed). Handbook of Islamic Banking. Cheltenham: Edward Elgar Pub. Co, (2007).

      [10] Isola, L. A., Olubukoye, O., Eseosa, O. D., & Olufemi, O. Has Financing Poverty Reduction Scheme Help to Alleviate Poverty? Evidence from Nigeria. Humanities and Social Sciences Letters, 2(2), 81-92, (2014).

      [11] Ghosh, V., Singh, M., Verma, S., Mitra, N., Ariadno, A., Agarwal, S., & Padala, S. The relationship between economic growth and financial sector development in Indonesia. International Journal of Emerging Trends in Social Sciences, 1(2), 61-67, 2017.

      [12] Abuh, P. O., Gabriel, R., & Ogwuche, J. An Analysis of Women Farmers in Rice Production in Donga Local Government Area of Taraba State. International Journal of Emerging Trends in Social Sciences, 1(1), 16-21, 2017.

      [13] ANYANWU, F. A., ANANWUDE, A. C., & OKOYE, N. T. An Empirical Assessment of the Impact of Commercial Banks’ Lending on Economic Development of Nigeria. International Journal of Applied Economics, Finance and Accounting, 1(1), 14-29, 2017.

      [14] Awuah, S. B., & Addaney, M. The interactions between microfinance institutions and small and medium scale enterprises in the Sunyani municipality of Ghana. Asian Development Policy Review, 4(2), 51-64, 2016.

      [15] Karabulut, T., & Sen, G. Analysis of Macroeconomic Factors Which Affect Performance of Global Finance Centers. Asian Economic and Financial Review, 8(1), 63-70, 2018.

      [16] Mapharing, M., & Basuhi, E. Electronic Banking and Bank Performance: Botswana Context. Journal of Accounting, Business and Finance Research, 1(1), 84-93, 2017, (2017).

  • Downloads

  • How to Cite

    Widjaja, G. (2018). The Implementation of Musharakah Financing in Indonesia; a Legal Regulatory Perspective. International Journal of Engineering & Technology, 7(4.29), 11-13. https://doi.org/10.14419/ijet.v7i4.29.21589