Quo Vadis, Islamic Banking?

(Literature Study on Islamic Commercial Banks and Sharia Business Units in Indonesia)

Abstract

Abstract. Financing in Islamic banking in Indonesia, even throughout in the world is
dominated by murabahah financing. This is not an ideal condition, because ideally the
financing of Islamic banking is dominated by profit sharing-based financing, namely
mudharabah and musyarakah. This paper aims to describe the condition of the financing
portfolio in Islamic banking that is not in accordance with its characteristics, namely profit
sharing; identify the causes; and contribute to the solution of the problem. The dominance
of murabahah financing is shown in proportion to the position on January 31, 2017 which
reached 60% of total financing. The macro impact of the domination of murabahah
transactions is that the monetary sector moves faster than the real sector which can
ultimately lead to an economic crisis. Micro-impact, murabahah financing tends to
encourage individual society to be consumptive because the purpose of this financing is
more for consumptive matters, while profit-based financing will encourage individuals to
be productive because profit-based financing is definitely intended to finance things which
are productive. Broadly speaking, the problem needs to be addressed through two things,
the first solution comes from the Government in the form of institutional and/ or personal
structural support and law enforcement that can be voluntary followed by incentives or
mandatory followed by sanctions, so that profit-based financing in Islamic banking is more
dominant than murabahah financing. The second solution is sourced from Islamic banking
itself in the form of increasing awareness that its purpose is not solely business but also
falah (welfare of the people), so that ease of system, procedure and requirements for
society to inclusion in profit sharing based financing can be created, while remains paying
attention prudential banking aspects.

Keywords: murabahah financing, profit sharing based financing, mudharabah financing,
musyarakah financing, and falah