The Difference of the Mudharabah Agreement (Akad) Concept based

on the Sharia Banking Act and the Implementation of Kaffah and

Istiqamah Principles in Indonesia

Nikmah Mentari, Rahayu Mulia Romadoni, Baharudien Dzulqarnain

Universitas Airlangga, Kampus B Jl. Airlangga No.4-6 Surabaya, Indonesia

Keywords: banking, mudharabah, sharia.

Abstract: This study aims to formulate and determine the ratio legis of Sharia Banking Act. It also aims to examine the

Sharia Banking Act in comparison to the existing Sharia norms. The Sharia Banking Act provides different

definition on the concept of mudharabah agreement (akad) which is stated on the explanation of Article 19

paragraph (1) letter b and c. Meanwhile, the implementation of kaffah and istiqamah principles in the

Explanation of Article 3 of the Sharia Banking Act deviate from mudharabah agreement (akad). This research

employs doctrinal methodology. This study finds that mudharabah agreement contain fair and equal principle

to between the owners of capital and managers, as well as the daring responsibility of taking risks. It is

necessary for conducting judicial review related to profit and loss sharing particularly Article 19 letter b and

c of Sharia Banking Act.

1 INTRODUCTION

The establishment of sharia banking is due to the

preference of non-interest banking system from the

Moslems in Indonesia who want to enforce sharia

economy. Indonesia is one of the countries with the

largest Moslems population, but they get to know of

the sharia bank quite late, which was in 1991

pioneered by Bank Muamalat Indonesia. Islamic

banking was just regulated seven years later based on

the Law Number 10 of 1998 on the Amendment of

Banking Act Number 7 of 1992. Then, the

government released the Sharia Banking (Islamic

Banking Act) Number 21 of 2008. Article 1 number

3 states that "Commercial Bank is a bank

conducting conventional business activities and / or

based on Sharia Principles of which its activities

provide services in the payment traffic." Furthermore,

Sharia Principles clause referring to sharia banking

system are mentioned in the following articles.

To some degree, Muslim customer go to sharia

bank is not only for economic reason but also for

ideological reason (Agus Triyanta, 2009). The

obedience of Muslims in carrying out religious orders

is not merely worship, but also 'hablumminannass

relationship (horizontal relationship among human as

fellow creatures) is equally important in social

interaction as the way of life.

Article 3 of the Sharia Banking Act is not aimed

at supporting the implementation of national

development but also at holding sharia banking so

that it does not deviate from the substance of 'sharia’

which is thorough (kaffah) and consistent

(istiqamah). In the Islamic Banking Act, the author

encounters an inconsistency in the Explanation of

Article 19 paragraph (1) letter b and c in which one of

sharia banking products namely financing and

collecting funds use the same agreement (akad) that

is mudharabah. However, in the Explanatory Article

section there are different treatments.

Explanation of Article 19 Paragraph (1) Letter b,

"Mudharabah Agreement" in collecting funds is a

cooperation agreement between the first party (malik,

shahibul mal, or the Customer) as the owner of the

fund and the second party ('amil, mudharib, or Sharia

Bank), which acts as a fund manager by dividing

business profits in accordance with the agreement set

forth in the Akad. Letter c, referred to as

"Mudharabah Agreement" in financing is a contract

of cooperation between the first party (malik,

shahibul mal, or Sharia Bank) which provides all

capital and serves as the second party ('amil,

mudharib or Customer) acting as managers of funds

Mentari, N., Romadhoni, R. and Dzulqarnain, B.

The Difference of the Mudharabah Agreement (Akad) Concept based on the Sharia Banking Act and the Implementation of Kaffah and Istiqamah Principles in Indonesia.

DOI: 10.5220/0010050202230227

In Proceedings of the International Law Conference (iN-LAC 2018) - Law, Technology and the Imperative of Change in the 21st Century, pages 223-227

ISBN: 978-989-758-482-4

223

by sharing business profits in accordance with the

agreements set forth in the Agreement, while the

losses are borne entirely by the Sharia Bank unless

the second party makes a deliberate mistake,

negligent or in violation of the agreement.

Therefore, the issue of this study is the legis

ratio of sharia banking act to distinguish the definition

of mudharabah concept on the Explanation of Article

19 paragraph (1) letter b and c and the

implementation of kaffah and istiqomah principles in

the Explanation of Article 3 of Sharia Banking Act in

Indonesia.

2 MATERIALS AND METHOD

This paper uses two information sources. The first

one is primary legal material (Al-Qur’an, Al-Hadits,

and the Act of Sharia Banking) and secondary legal

materials (legal entities from the analysis of experts

available in literary books and scientific articles).

The method applied is normative juridical legal

research, which relates to the prevailing norms and

legal principles. The approach taken is statute

approach (Peter Mahmud Marzuki, 2017) in the form

of Explanantion of Article 19 paragraph 1 letter b and

c with Explanation of Article 3 of Sharia Banking

Act and conceptual approach (Peter Mahmud

Marzuki, 2017) in the form of mudharabah, kaffah

and istiqamah concept.

3 RESULT AND DISCUSSION

3.1 Scope of Mudharabah Agreement

(Akad)

The term mudharabah literally derives from the

expression of Arabic fial-'ard which means "making

a journey" (Amir Shaharuddin, 2010). Mudharabah

is from the word dharb, which means to ‘hit’, the

process of an individual in starting a business.

Technically, according to Syafii Antonio, it is an

agreement between the parties; the first party (shahib

al-mal) provides all the capital, while the other party

becomes the manager (Zainuddin Ali, 2008).

According to the fatwa or edict of the National

Sharia Counsel (DSN) Indonesia Ulama Board

Number 07/DSN-MUI/IV/2000 on Mudharabah

Financing (Qiradh), mudharabah financing is

financing distributed by Shari’a Finance Institute

(LKS) to a certain party for a productive business.

Based on Fatwa (decrees) of Majelis Ulama

Indonesia (Indonesian Council of Ulama)

mudharabah is the first and the main key in sharia

banking, which is an alternative to avoid usury

solutions that are generally found in the interest of

conventional banks.

Mudharabah is a relationship between two or

more persons, such that one or more persons supply

capital and the other run the business on his or their

behalf at an agreed rate of profit (Trisadini

Prasastinah Usanti and Abdul Somad, 2016). Legal

aspect of mudharabah is in the Qur'an Surah

Muzammil verse 20 which means, "And some of them

people who walk on earth seek some of God's gifts ..";

Al-Maidah verse 1 "You who have believed, fulfill all

contracts ....,"; Al-Anfal verse 27, "You who have

believed, do not betray Allah and the Messenger or

betray your truts while you know (the consequence)."

The history of Tabarani Hadith narrated by Ibn

Abbas said that Abbas bin Abdul Muttalib did give

funds to business partners through mudharabah.

Abbas required that the funds were not brought across

the ocean through a dangerous valley or buying

livestock. Breach of such rules is the responsibility of

the business partner. The condition was submitted to

the Messenger of Allah and he allowed it (Zainuddin

Ali, 2008). This hadith then gave rise to two types of

Mudharabah agreements, consisting of (Zainuddin

Ali, 2008):

1. Mudharabah Muthlaqah (restricted), is a form

of cooperation between shohibul maal and

mudharib, which scope is very wide and the

specification is not limited by business type,

time, and business area.

2. Mudharabah Muqayyadah (unrestricted),

mudharib is limited by small scope of business

type, time, or place of business.

Abdurrahman Al-Jaziri suggested that

mudharabah is a giving of property(s) to others as

venture capital. However, he added that the gain will

be shared among the parties if the loss is borne by the

owner of the capital (Zainuddin Ali, 2008). The

executioner of capital will loss their time, mind, and

effort, as well as their managerial (Mahmudatus

Sa’diyah dan

Meuthiya Athifa Arifin, 2013). Under

the principle of mudharabah, the share of profit

should be stated as ratio of the total profit. Profit can

not be expressed as percentage of the capital invested

(Mohammad Ghufron Az, 2015).

M. Yazid Afandi explained that the value of

equality justice in Mudharabah is the profit and risk

sharing of each party who cooperate in accordance

with the portion of involvement. The risk of the

financiers is the loss of investment. The mudharib

party accepts the risk of loss of energy and mind in

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the management of the capital (Popon Srisusilawati

dan Nanik Eprianti, 2017).

The concept of mudharabah funding adopted

from mudharabah muthlaqah type where the

customer fund of the capital owner is fully managed

by shariah bank. Customers wait for the profit only,

because they are not involved in the financial

management. Unlike the case of mudharabah

muqayyadah, which is then adopted by mudharabah

financing, the agreement of a bank or funder and the

beneficiary of the same funds are in the attachment of

type of business, time, and place. Thus, the loss is

charged to the bank or funder to appreciate the exit of

the mudharib’s efforts which should be limited by

type of business, time, and place.

3.2 Purpose of Sharia Banking Act

The principle of the establishment of good legislation

include: clarity of objectives, institutional or proper

forming officials and suitability between the

categories, hierarchy, and workable material content

and usefulness, as well as usability, clarity of

formulation, and disclosure (Acticle 5 Act Number 12

of 2011 on the Establishment of the Regulation

Legislation).

The implementation of sharia law as the

implementation of Article 29 Paragraph (1) and

Paragraph (2) of the 1945 Constitution is about the

freedom in carry out religion for its adherents and of

Article 28 letter E of the 1945 Constitution, in that

religion and practise the religion is the right of human

(Mardani, 2013).

Based on Article 20 of the 1945 Constitution of

the Republic of Indonesia, the Legislative Assembly

is authorized to formulate and regulate the law. In its

journey, formulating the Sharia Banking Act also

involved such as the Association of Indonesian Sharia

Banking, National Sharia Board (DSN)-Indonesian

Council of Ulama(MUI), Sharia Economic

Community (Sekretariat Jenderal Dewan Perwakilan

Rakyat Republik Indonesia, No Year,).

Sharia banking is recognized when the Act

Number 10 of 1998 on Banking Article 1 Figure 3

alluded to the principles of sharia. Commercial Bank

is a bank conducting business in a conventional and

or based on Sharia Principles which in its activities

provide services in the payment traffic. It seem that

Indonesia applied dual banking system, namely

conventional system that uses the interest system and

sharia system which is based on the provisions of

Islam (Titik Triwulan Tutik, 2016).

Article 1 paragraph 12 states that the principle of

sharia is the islamic principle law in banking

activities based on decrees (fatwa) issued by the

institution that has authority in determining fatwa in

the sharia area. Sharia compliance is not only on

positive law compliance in Indonesia, but also fatwa

(decrees) by Majelis Ulama Indonesia (Indonesian

Council of Ulama) that has an equal role in the

context of sharia economy. Ulama fatwa generally

enforces sharia principles that avoid riba (interest),

gharar (uncertainty), maysir (gambling/speculation)

and other haram activities. Further affirmed in Article

3, it aims at supporting the implementation of national

development in order to improve justice,

togetherness, and equity of the people's welfare. Then

the explanation mentions about obligation to conduct

the sharia principles thoroughly (Kaffah) and

consistenty (Istiqamah).

Protection of customers are reinforced in the

contents of the law as well as the principles,

objectives, and functions of sharia banks including

the actualization should be felt comfortably by the

bank's customers (Gunarto Suhardi, 2003).

3.3 Fundamental Concept of Profit-

Loss Sharing of Mudharabah

Agreement (Akad)

By the definition, profit sharing is defined as the

distribution of profits and some part of earnings of

employees of a company (Muhammad, 2005). The

distribution occurs not only when the company earn

the profit but also when it experiences the loss. It will

cause the agreement called profit and loss sharing

agreement (Fahrurrozi, 2016).

Some of important things in the profit and loss

sharing is that the profit distribution for each party

should be proportionate; the capital owner(sahibul

maal) is not responsible with the loss outside the

capital given; Mudharib (partners) does not share the

loss except for the loss of time and energy. This

occurs when the loss is not come from an error of

mudharib. Proportional is defined as the suitability of

the profit sharing with the amount of paid up capital.

Besides, the amount of profit must be an agreed

percentage.

In mudharabah agreement, the principle of justice

will actually be realized because both sides feel the

benefits and bear the loss. Investors bear the loss of

capital, while business the loss of energy, mind, and

time. Hence, in mudharabah, no one wil be justified

to make profits without having to bear the business

risks (Trisadini Prasastinah Usanti and Abdul Somad,

2016).

The Difference of the Mudharabah Agreement (Akad) Concept based on the Sharia Banking Act and the Implementation of Kaffah and

Istiqamah Principles in Indonesia

225

3.4 Kaffah and Istiqamah Principles

The efforts to implement Islam in a kaffah and

istiqomah are closely related to the meaning of

various provisions of law in Al-Qur'ān and Sunnah.

Kaffah according to the explanation of Sharia

Banking Act is thorough, while istiqomah is

consistent. Sulastomo stated that the provisions of the

law based on the definite verse require Muslims to run

the business in totality based on the rules of ushul al-

fiqh (Moh. Zahid, 2008).

The concept of kaffah is based on the word of God

in sura al-Baqarah verse 208: "O believers enter into

Islam Kaffah, and do not follow the steps of shaitan.

Surely shaitan is a real enemy to you". According to

Ahmad Musthafa al-Maraghi, the word ‘al-silm’

means language of peace and salvation, which is used

also with the meaning of Islam. While kāffah means

thoroughly without exception (Moh. Zahid, 2008).

Embracing and practicing in kaffah is the

command of Allah and it must be implemented by

every believer in any condition. In the same

paragraph, we are prohibited from following the

syaithan, because of the attitude to follow the traces

of syaithan is contrary to Islam (Sovia Mas Ayu,

2015).

According to Ibnu Jarir al-Tabari, Imam Al-Tabri

explains the meaning of Kaffah in his tafseer as "the

command to carry out all His Shariah (Islam) and His

hudud which is an Arabic term that refers to Islamic

penal law or Quranic punishments through not

reducing some of them and practicing some of them.”

This is because kaffah is a characteristic of Islam, so

it can be counted "Enter you by practicing all the

teachings of Islam, and do not you subdue a bit of it

the Imam master with Muhammad and with some that

he came with” (Wahib Akmal, 2017). Therefore,

Salim Segaf al-Jurfi stated the necessity of Islam in

kaffah is because Islamic Shari'a is believed to have

more value. The value is that it includes the

dimension of the world and the hereafter. Islamic law

contains provisions that are preventive and solutive

(Moh. Zahid, 2008).

The implementation of Islam kāffah can be

measured when Islamic values become an inherent

part of life on earth. The intended Islamic values are

the implementation of maqāsid al-shari'ah al-

khamsah in the five shari'ah's daily life, namely, Hifz

al-Dīn (protection of religious belief), Hifz al-Nafs

(protection to the salvation of the soul), Hifz al-'Aql

(protection of the existence of reason), Hifz al-Nasl

(protection of offspring), Hifz al-Māl (protection of

property). Muamalah is closely related to the

protection of property (hifz al-Mal). The reference of

protection of property are Qur'an Surah Al-Baqarah

verse 275 and QS. An-Nisa' verse 29 (Moh. Zahid,

2008).

The implementation of Islam as the way of life is

consistently applied in any aspect of life for the

achievement of a good life order (QS An-Nahl: 97)

and the denial will only create a bad order, both for

life in the world and in the hereafter (QS Thahaa: 124

-126)

(Muhammad Syafi`i Antonio, 2001). HR.

Muslim no. 782, from Aisyah r.a, the Prophet SAW

said, "O people, do practice according to your

abilities. Because God is not bored until you feel

bored. (Know that) God's most beloved practice is a

little continuous practice.”

4 CONCLUSION

The regulations on the principle of mudharabah

under the law Number 21 of 2008 on Sharia Banking

in Indonesia, as it turns out, find that there are

inconsitent (istiqamah) stipulations and non-kaffah,

that is between the norms found under the

Explanation of Article 19 paragraph (1) letter b and c

with the norms found under the Explanation of

Article 3 on kaffah and istiqamah principle.

Inconsistency in regulations will lead to legal

uncertainty and the effort of establishing sharia

compliance as mandated under the Sharia Banking

Act is difficult to implement in Indonesia. Certainly,

it will be unjustice for customer who wants to

implement sharia clearly and get advantage fairly.

The concept of mudharabah has a positive value,

which is a fair equality among owners of capital and

managers, as well as the equal responsibility in taking

the risk. Judicial review is necessary for the

Explanation of Article 19 paragraph (1) letter b of

Sharia Banking Act on the relation of mudharabah

with kaffah and istiqomah principles.

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