Islamic Bank
Sharia Principles
Sharia Principles are the principles of Islamic law in banking activities (depositing funds and/or financing business activities, or other activities) based on fatwas issued by the National Sharia Council (DSN) which has the authority to determine fatwas in the field of sharia.
Sharia Banks are banks that carry out their business activities based on Sharia Principles and according to their types consist of Sharia Commercial Banks and Sharia People's Financing Banks.
Sharia Commercial Banks are Sharia Banks that in their activities provide services in payment transactions. (Law No. 21 of 2008 concerning Sharia Banking).
Objectives of Islamic Banking
Islamic Banking aims to support the implementation of national development in order to improve justice, togetherness, and equal distribution of people's welfare.
Islamic bank business activities
Fund Collection
Funds placed by customers in Islamic Banks in the form of Savings or Investments based on the Agreement between the Islamic Bank and the Customer concerned.
Deposits are funds entrusted by customers to Islamic banks and/or UUS based on wadi'ah contracts or other contracts that do not conflict with Islamic principles in the form of demand deposits, savings or other forms that are similar to these.
Savings are deposits based on the wadi'ah contract or investment of funds based on the mudharabah contract or other contracts that do not conflict with Sharia principles, the withdrawal of which can only be made according to certain agreed terms and conditions, but cannot be withdrawn by check, giro bill, and/or other instruments that are considered similar.
Deposits are investment funds based on mudharabah contracts or other contracts that do not conflict with Sharia principles, the withdrawal of which can only be made at certain times based on the contract between the depositing customer and the Sharia Bank and/or UUS.
Giro is a deposit based on a wadi'ah contract or other contract that does not conflict with Sharia principles, the withdrawal of which can be made at any time using a check, giro bill, other payment order, or by transfer order.
Investments are funds entrusted by customers to Islamic banks and/or UUS based on mudharabah contracts or other contracts that do not conflict with Islamic principles in the form of deposits, savings or other forms that are similar to these.
Fund Distribution (Financing)
Financing is the provision of funds or bills that are equated with it in the form of:
Financing based on the principle of profit sharing in the form of mudharabah and musyarakah
Lease transactions in the form of ijarah or hire purchase in the form of ijarah mutaniya bittamlik
Buying and selling transactions with profits in the form of murabahah, salam and istishna receivables
Lending transactions in the form of qardh receivables; and
Service rental transactions in the form of ijarah for multi-service transactions based on an agreement or agreement between Sharia Bank and/or UUS and other parties which requires the party financed and/or provided with funding facilities to return the funds after a certain period of time in exchange for ujrah, without compensation , or profit sharing.
Based on an agreement or agreement between the Sharia Bank and another party which requires the party financed and/or provided with funding facilities to return the funds after a certain period of time in exchange for profits, ujrah, no compensation, or profit sharing.
Principles of Sharia Bank Operations
Sharia Banks adhere to the following principles:
Equality of Interest & Usury Components
| Interest | Riba |
| Transactions based on loans (Qardh) | Akad based on loans (Qardh) |
| Additions to the principal | Additions to the principal |
| The additions are in the form of nominal, fixed percentage (flat) and or compound | The additions can be in the form of nominal, flat, compound, goods and or benefits. |
| The percentage is linked to the principal amount | In the form of a percentage, it is always linked to the principal amount |
| The amount of interest is linked to the payment period | The amount of the addition can be linked to the payment period |
Difference between Interest and Profit Sharing
| Interest | Profit Sharing |
| Interest usually occurs in loan transactions (credit) and fundraising. | Profit sharing only occurs in Profit Sharing contracts (Mudharabah & Musyawarah) not Loan contracts (Qardh) |
| Funds for interest payments can be taken from any income | Profit sharing funds can only be taken from the results of managing the funds. |
| The amount of interest percentage is related to the amount of money lent | The amount of profit sharing is based on the amount of profit/income obtained and the agreed ratio |
| Interest must still be paid even if the project makes a loss. | Profit sharing is profit sharing and loss sharing. If the profit is divided according to the ratio and if the loss is borne by the funder. |
| The amount of interest payments does not increase even if the amount of project profit and financed increases. | The amount of profit sharing increases along with the increase in the amount of profit. |
| The existence of interest is doubted (if not condemned) by all religions including Islam. | No one doubts the benefits of profit sharing. |
Difference Between Interest and Profit Margin
| Interest | Profit Margin |
| Interest usually occurs in loan transactions (credit) and fundraising | Profit sharing only occurs in Profit Sharing contracts (Mudharabah & Musyarakah) not Loan contracts (Qardh). |
| Funds for interest payments can be taken from any income | Profit sharing funds can only be taken from the results of managing the funds. |
| The amount of interest percentage is related to the amount of money lent | The amount of profit sharing is based on the amount of profit/income obtained and the agreed ratio. |
| Interest must still be paid even if the project makes a loss. | Profit sharing is profit sharing and loss sharing. If the profit is divided according to the ratio and if the loss is borne by the funder. |
| The amount of interest payments does not increase even though the amount of profit from the project being financed increases. | The amount of profit sharing increases along with the increase in the amount of profit. |
| The existence of interest is doubted (if not condemned) by all religions including Islam. | No one doubts the benefits of profit sharing. |
Differences in Interest & Wages/Rent (Ujrah)
| Interest | Wages/Rent (Ujrah) |
| Interest usually occurs in loan transactions (credit) and fundraising. | Rental wages only occur in Ijarah (rental) contracts. |
| Interest is usually in the form of a percentage. | Rental wages are usually in the form of a nominal amount. |
| The existence of interest is doubted (if not condemned) by all religions including Islam. | No one doubts wages or rent in rental or wage-wages transactions. |
