Islam in Southeast Asia: Political, Social and Strategic Challenges for the 21st Century

4. ISLAMIC ECONOMIC INSTITUTIONS IN INDONESIA: A RELIGIO-POLITICAL PERSPECTIVE

64 64 Bahtiar Effendy 4 ISLAMIC ECONOMIC INSTITUTIONS IN INDONESIA: A RELIGIO-POLITICAL PERSPECTIVE Bahtiar Effendy INTRODUCTION In 1991, an Islamic bank, Bank Muamalat Indonesia (BMI), was founded in Indonesia. In a way, this was a historical landmark considering the fact that the long-overdue project had finally materialized. Muslims in Indonesia had been aspiring to the creation of such an important financial institution since the 1970s. For many of them, the existence of an Islamic bank is a necessity to enable them to perform their religious obligation in the economic field. As widely understood Islam prohibits riba (usury).1 What constitutes riba, however, is still a debatable subject. Among the fiqh (Islamic jurisprudence) scholars themselves, there has not been a final word regarding the issue. Different opinions and interpretations of riba are still very much in existence. In fact, discussions over the issue tend to develop into a more detailed, complex, and sophisticated manner, covering both the economic as well as religious dimensions. Yet, the likelihood is that Muslims will not come to a single understanding of it in the near future.2 Many Indonesian Muslims, like their counterparts throughout the Islamic world, believe that interest is one kind of riba. Thus, in their view, the 64 04 Islam Pt I_Ch 4 4/2/05, 10:39 AM 64 65 Islamic Economic Institutions in Indonesia 65 existence of interest-based financial institutions does not seem to conform to Islamic teachings. A larger part of the Muslims, however, perceive otherwise. As such, they do not consider interest as a form of riba. Therefore, they do not seem to have any theological inconveniences in conducting economic and/or financial transactions with any existing conventional or non-Islamic banks. To make the question of interest more difficult to settle is the presence of the sizeable bulk of Muslims who take a middle stance. They argue that, given the strengths and weaknesses of each differing positions, interest can be identified as mutasyabihat, a legal issue that is not yet clear and therefore must be avoided. At best, they are of the opinion that until the foundation of an Islamically operated financial infrastructure is secured, the existence of a conventional banking system can be accepted as an emergency institution. The fact that perceptions as to what constitutes riba are by no means unified does not appear to prevent Muslims from establishing Islamic financial institutions. Other than BMI, Indonesian Muslims now enjoy the presence of Bank Syariah Mandiri, a number of Unit Usaha Syariah (Islamic Banking Units under the management of Bank IFI, Bank Negara Indonesia, Bank Jabar, Bank Bukopin, Bank Danamon, and Bank Rakyat Indonesia), more than eighty Bank Perkreditan Rakyat Syariah (BPRS, Syariah or Islamic Rural Bank), and over 3,000 Bait al-Mal wa al-Tamwil (BMT, which literally means treasury and financing house).3 There are many views with regard to this new development. One dominant position is that the country’s capitalism, and perhaps other important aspects as well, is undergoing the process of Islamization.4 Others are of the opinion that in the end the state has to accommodate the specific interests of Muslims in order to enhance its own socio-cultural legitimacy.5 Still, there are those who see this phenomenon in terms of economic opportunity for Muslim small and medium entrepreneurs to develop their business activities.6 In any account, the existence of the already mentioned Indonesian Islamic economic institutions is a serious effort to provide necessary instruments or infrastructures for those who for religious or other reasons do not feel comfortable conducting financial and/or commercial transactions through the existing conventional banks. In this context, the establishment of BMI and other similar institutions are useful alternatives.7 Indonesia, being the largest Muslim country in the world, was once considered a lagger with regard to the development of Islamic economic infrastructure. Compared to its neighbouring state of Malaysia or even the Philippines for that matter, where Muslims constitute a minority — the Indonesian state seemed to be unwilling to take the interests of the country’s 04 Islam Pt I_Ch 4 4/2/05, 10:39 AM 65 66 66 Bahtiar Effendy Muslims seriously. Included in this matter was their aspiration to form an Islamically-administered bank. For that reason, many believed that it was when the state emerged as a strong and hegemonic institution under the New Order regime, where no one could escape from...