Syari’ah Banking and Financial Institutions in a Positive Legal Perspective

This article reviews the development of Islamic banking and financial institutions in Indonesia from a positive legal perspective. Starting in the early 1980s, an intensive discussion on Islamic banks as a pillar of Islamic economics was conducted, followed by the initiative to establish Bank Muamalat Indonesia in 1990. Significant developments occurred with the ratification of Law Number 10 of 1998, which provided a legal basis for the operation of Islamic banks and encouraged conventional banks to open Islamic branches. Islamic banks and conventional banks have some similarities in technical aspects, but the differences lie in the legal aspects, organizational structure, and work environment. Syari’ah banks operate based on the principle of profit sharing and must comply with the fatwa of the Syari’ah Supervisory Board. The main function of the National Syari’ah Council is to supervise the products of Islamic financial institutions to comply with Islamic law, issue fatwas, and provide reprimands if there are irregularities. Government Regulation Number 72 of 1992 explains the principle of profit sharing that must be applied by Islamic banks. In addition, Bank Muamalat Indonesia (BMI) operates three operational principles: a profit-sharing system, a buying and selling system with profit margins, and a fee (service) system. BMI products include various types of savings and financing that are in accordance with Syari’ah principles. From a positive legal perspective, there is a significant difference in handling usury. The traditional interpretation of riba focuses on prohibitions based on financial exploitation. However, there is an argument that the Islamic banking system needs to be more humane and fairer in its operations. The Qur'an's moral and humanitarian interpretation regarding riba emphasises preventing the exploitation of financial needs, not just the addition of interest.