Islamic Economics and Islamic Banking, the basic concepts and relationships

Islamic Economics and Islamic Banking-Islam is a religion that has a concept that governs human life in a comprehensive and universal, both in relation to the Creator (God) as well as in dealings with fellow human beings. There are three important pillars in Islamic Economics:
  1. Aqeedah; faith: Islamic teaching component that regulates the belief of the existence and power of God so it must be a Muslim faith while performing various activities in the world solely to earn Allah's pleasure, as the caliph who received a message from God.
  2. Shari'a; law: the component that regulates the Islamic teachings about the life of a Muslim, both in worship and in the field "Muamalat aqeedah" which is the visualization of the conviction. While "Muamalat" covering various areas of life which include anything related to economic or property and commerce (muamalah maliyah).
  3. Morals: the foundation of behavior and personality that marks him as a devout Muslim according to Sharia and "Aqeedah" that guide his life, so-called moral good (akhlaqul karimah) as prophet hadith which states: "It is not I was sent to earth except to perfect Morals "(Al-Hadith). Quite a lot of Islamic guidance governing the economic life of the people, which in outline is as follows:

    • Islam put the function of money as merely a medium of exchange and not as a commodity, so it does not deserve to be traded much less an element of uncertainty or speculation (gharar) so that there is not the price of money, but value for money to exchange for goods.
    • "Usury" in all its forms is prohibited even in a Quranic verse about the prohibition of "Usury" is Al-Baqarah verse 278 which is expressly stated as follows: O ye who believe! Observe your duty to Allah, and give up what remaineth (due to you) from usury, if ye are (in truth) Believers. (278).
    • Prohibition of "usury" is also found in Christian doctrine, both old and new covenant agreement, which basically requires lending to others without asking for flowers in return.
    • Although there is still a while opinion, especially in Indonesia which is still doubtful whether the bank interest include the "usury" or not, it really has been a consensus scholars, jurists and Islamic bankers among the Islamic world which states that bank interest is "usury" and "usury" forbidden.
    • Not allow various forms of activities that contain elements of speculation and gambling including economic activity which is believed will bring harm to society.
    • Assets must be spinning so should not only focus on a handful of people and God is not like people who hoard possessions so as not productive and therefore, for those who have property which is not productive, will be subject to greater charity than a productive asset. It is also based doctrine that the place of humanity on earth as the caliph who receives a mandate from God as the absolute owner of everything contained within the earth and the human task is to make prosperity and welfare.
    • Working and or making a living is worship and must be done so that no one does not work - which means ready to face the risks - can make a profit or benefit. In many areas of life including the economic activities must be conducted transparently and fairly consensual, no coercion of any party.
    • The obligation to keep records of every transaction, especially non-cash and the presence of witnesses who could be trusted.
    • "Zakat" as an instrument for the fulfillment of an obligation which is the allowance for property rights of others who are eligible to receive, as well as a strong recommendation to issue "infaq and shodaqoh" as a manifestation of the importance of equitable distribution of wealth and fight poverty.
As described above, the basic principles of the Islamic economic system would be the basis of operation of Islamic banks is the most prominent is no concept of money interest for commercial purposes. Islam does not recognize borrowing money but it is a partnership / collaboration (mudaraba and musharaka) with the principle of sharing, borrowing money is only possible for a social purpose without any compensation.


In practice, the functions of Islamic banking will consist of:

  1. As the recipient of the mandate to invest the funds entrusted by the investment account holders / depositors on the basis of profit-sharing in accordance with bank's investment policy.
  2. As an investment manager of fund of funds owned by the owner / sahibul mall, according to the direction desired by the owners of investment funds (in this case the bank acts as investment manager).As a provider of payment traffic services and other services that do not conflict with Islamic principles,
  3. As a manager of social functions such as management of funds and the receipt and disbursement of zakat funds virtues (optional function).
Of the function, then the product of Islamic banking consists:
  • A. The principle of mudaraba
  • B. Principle of Musharaka
  • C. Principle of Wadiah
              Pursuant to the authority granted the "wadiah" divided into two parts:

    1. "wadiah yadhamanah" which means the recipient entitled to deposit funds / consignment to be used properly without any obligation entrusted to the recipient to reward deposan by remaining on the deal can be retrieved at any time necessary.
    2. "Wadiah amanah" does not give authority to the recipient of the deposit to use the goods / funds that are deposited.

  • D. The principle of Sale and buy (Al Buyu ') and consists of:
    1. Murabaha, sale and buy contract between two parties where the buyer and seller agree on the selling price of the purchase price plus purchase costs and profits for the seller. Murabaha can be made in cash can also pay for respite or pay in installments.
    2. Salam, purchasing goods with an direct payment and goods are delivered later.
    3. Ishtisna, the purchase of goods through the order and the necessary processes to manufacture according to buyer's order and payment made in advance at once or gradually.

  • E. Services, consists of:
    1. Ijara is a leasing activities of goods in return for rental income, if there is an agreement of transfer of ownership at the end of the lease is called "Ijara mumtahiya bi Tamlik" (equal to an operating lease)
    2. Wakalah the first party to authorize a second party (as deputy) to certain matters in which both parties get a return for a fee or commission.
    3. Kafalah the first party is willing to be the insurer of the activities carried out by the second party in accordance with the agreement during which the first party receives in return for a fee or commission (warranty).
    4. Sharf is the exchange / sale of different currencies with immediate delivery / spot prices based on the agreement in accordance with the market price at the time of the exchange

  • F. The principle virtue of acceptance and benevolence funds in the form of zakat, infaq, Sadaqah and others as well as channeling "alqardul hasan" namely the distribution and in the form of loans for helping the poor to productive use without compensation unless required repayment of debt principal.
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Islamic Economics

Islamic Banking

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