Restructuring of Non-Performing Financing of Murabaha Contracts

in Sharia Banks

Rachmi Cahya Amalia

, Dina Fitrisia Septiarini

, Sri Herianingrum

and Achsania Hendratmi

Sekolah Pascasarjana, Airlangga University, Jalan Airlangga 4-6, Surabaya, Indonesia

Departement of Sharia Economics, Airlangga University, Jalan Airlangga 4-6, Surabaya, Indonesia

Keywords: Murabaha, Non-Performing Financing, Restructuring, Rescheduling, Reconditioning.

Abstract: This study aims to determine the implementation of the restructuring of non-performing financing (NPF) in

murabaha contracts occurring in Bank Syariah Mandiri (BSM). This study is qualitative with case study

method. The data validation uses a triangulation technique in which the data are checked between

interviews with the key informant and the secondary data, which are examples of NPF and standard

operating procedures. The analysis technique uses data reduction, display data and data verification. The

results show that in the implementation, Bank Syariah Mandiri always evaluates how the customers are

conditioned by their faith and financial condition, then they can decide which strategies will be used. The

handing of NPF is done by rescuing or restructuring in three ways, rescheduling, reconditioning and

restructuring.

1 INTRODUCTION

Banks are financial institutions that collect funds

from over-funded groups and distribute them to

groups lacking funds. Understanding banks

according to Law number 10 of 1998 on

Amendment of Act Number 7 of 1992 concerning

Banking, "a bank is a business entity that collects

funds from the public in the form of savings and

distributes it to the community in the form of credit

and or other forms in order improving people's lives".

According to Karim (2013: 97), "based on the

purpose of its use, sharia bank financing products

are divided into four groups, namely financing by

buying and selling principle, lease principle, profit

sharing principle and financing with complementary

agreement". One of the financing products with the

principle of sale and purchase is murabaha financing.

According to Lathif, "the high amount of financing

with the murabaha contract is because the prudential

principle of the bank can be applied relatively tightly

and standard so that the level of risk of loss is very

small" (Lathif, 2015: 2).

Implementation of financing does not always go

smoothly. Some of the things that can lead to non-

performing financing include changes in economic

conditions, mismanagement of banks and the

condition of customers. The problem affects the

reduced revenue of Islamic banks as it is reserved to

cover the NPF and the costs incurred by handling the

financing. To overcome the problem, the bank may

restructure its financing. Restructuring is a way to

help customers meet their obligations and save the

bank from non-performing financing thus reducing

losses to banks.

2 LITERATURE REVIEW

2.1 Sharia Banking

Based on Law number 21 of 2008 concerning sharia

banking, what is referred to as sharia banking is

anything that concerns a sharia bank and sharia

business unit, covering institute, business activity,

way and process in conducting its business activity.

While a sharia bank is a bank that runs its business

activities based on sharia principles and according to

its type consists of Sharia Commercial Bank and

Sharia Rural Bank.

Sharia banks according to Antonio and

Perwataatmadja are divided into two, namely the

bank that is in accordance with sharia principles and

the bank with the procedure referring to the

Amalia, R., Septiarini, D., Her ianingrum, S. and Hendratmi, A.

Restructuring of Non-Performing Financing of Murabaha Contracts in Sharia Banks.

DOI: 10.5220/0007537900850088

In Proceedings of the 2nd International Conference Postgraduate School (ICPS 2018), pages 85-88

ISBN: 978-989-758-348-3

provisions of Al-Qur'an and Al-Hadith. (Muhammad,

2005: 1). The purpose of establishing a sharia bank

is as an effort of the Muslims to base their economic

activities on the guidance of Al-Qur'an and Al-

Hadith.

2.2 Murabaha

Murabaha financing is a form of buying and selling

of goods at the original price with the profit (margin)

agreed by the seller and the buyer. Since the benefits

are agreed upon by both parties, the seller must

notify of the original price and the added benefits

(Karim, 2013: 113).

According to Ismail (2011: 139) murabaha is a

sale and purchase contract of certain goods, where

sellers mention the purchase price of goods to the

buyer then sell it by requiring the expected profit in

accordance with a certain amount. Murabaha

transactions are allowed, as written in Al-Qur'an

letter of Al-Baqarah (2) verse 275 which means: "...

Allah has justified the sale and purchase and forbids

usury ..." (Ministry of Religion, 1998: 86).

The following hadith also explains the

permissibility of murabaha in Islam. Rasulullah Saw

said, "Three things in it are blessings: suspension

sell, muqaradha (mudharaba), and mixing wheat

with flour for home use, not for sale" (Ibn Majah).

2.3 Financing Quality

Assessment of existing quality in the form of

financing is done based on factors related to

customer performance.

The classification of financing quality

(murabaha) is based on the time of payment and

fulfillment of the requirements made by the period

of financing, as mentioned (Djamil, 2012: 69):

1. Current, the financing is done on time and in

accordance with the terms of the contract.

2. In special attention, there are arrears of principal

installment and or margin up to 90 days.

3. Substandard, there are arrears of principal

installments and margins that have passed 90

days up to 180 days.

4. Doubtful, there are arrears of principal

installments and margins that have passed 180

days up to 270 days.

5. Loss, there are arrears of principal installment

and margin that have passed 270 days.

2.4 Non-Performing Financing (NPF)

A financing is said to be non-performeing if the

quality of the financing is in the category of

substandard, doubtful and loss (Djamil, 2012: 66).

NPF is one of the instruments of performance

assessment of a sharia bank which is an

interpretation of the assessment on productive assets,

especially in the assessment of non-performing

financing (Popita, 2013: 405). NPF is obtained from

the comparison between the amount of financing in

substandard quality (collectability 3), doubtful

(collectability 4) and loss (collectability 5) with the

total amount of financing (Purwanto, 2011: 24).

2.5 Handling

Financing that is categorized as non-performing will

be handled by way of rescue and settlement.

2.5.1 Rescue

Financing rescue is a technical term commonly used

for efforts and steps taken by banks to overcome the

financing problems faced by debtors who still have

good business prospects, but have difficulty paying

principal and/or other obligations (Djamil, 2012:

82).

Based on Bank Indonesia Circular Letter no.

13/18/DPbS dated October 22, 2008 concerning

Financing Restructuring for Sharia Commercial

Banks and Sharia Business Units, the methods of

restructuring are as follows:

a. Rescheduling is changes in payment schedule of

customers’ liability or terms, excluding extension

of mudharaba or musharaka financing that fulfill

current and maturity and not due to decreasing

ability of customers.

b. Reconditioning, that is, a change in some or all

of the financing requirements without adding to

the remaining principal amount of the customer's

loan to be paid to the bank, among others:

1) Reduction of repayment schedule

2) Change of installment amount

3) Change of time period

4) Changes in profit-sharing projection in

mudharaba or musharaka financing

5) Giving discount

c. Restructuring, namely changes in financing

requirements, among others includes:

1) Additional funding of bank financing facility

2) Conversion of financing contract

3) Financing conversion into a term sharia

securities, financing conversion into temporary

ICPS 2018 - 2nd International Conference Postgraduate School

equity participation in a customer company,

which may be accompanied by rescheduling or

reconditioning.

2.5.2 Settlement

If the restructuring of the financing is still

problematic, Islamic banks will take action to solve

the non-performing financing. Various ways are

used by Islamic banks, among them (Usanti, 2013:

112):

a. Settlement through warranty is done if based on

a re-evaluation, the customer's business prospect

is absent and/or the client is uncooperative.

b. Settlement through the National Sharia

Arbitration Board (BASYARNAS), if the

settlement can not be settled by deliberation.

c. Settlement through litigation/court, if the

customer does not have good intentions to fulfill

his obligations, while the customer still has

assets that are not controlled by the bank and

deliberately hidden.

d. Clear the book and delete the bill. Clear the book

is removing a book of loss financing from the

bank balance sheet, without removing the claim

rights. Clear billing is removing the customer's

unresolvable obligations, while eliminating the

claim rights.

3 RESEARCH METHOD

The research method is a qualitative approach with

case study research method. The type of case study

research used is descriptive because it is appropriate

to answer the "how" and "why" questions (Yin,

2014: 9). The formulation of this research problem is

"how is the implementation of the restructuring of

non-performance financing achieved in Murabaha at

Bank Syariah Mandiri?".

The credibility/validation test of data uses

triangulation techniques, namely the use of different

data collection techniques on the same source. Data

analysis is conducted through three activities,

namely reduction of data, data presentation,

conclusions/verification (Sugiyono 2014: 91).

4 DISCUSSION

NPF according to BSM financing policy is a

financing that is not expected to repay in part or in

whole, or the debtor can not repay its obligations in

accordance with the agreed schedule. Included as

NPF is a financing facility whose collectability is

still classified, but due to certain reasons and based

on the Bank's assessment it is assumed that the

debtor can not fulfill its obligations on time.

Restructured financing remains classified as NPF

until the debtor is fully capable of fulfilling its

obligations on time up to three liability payments

after being classified as current (Bank Syariah

Mandiri, 2005)

The handling procedures in Bank Syariah

Mandiri, among others:

1. A special unit of NPF management.

2. Analysis of NPF rescue/settlement.

3. Technique of evaluation/analysis to problem of

NPF.

4. Step selection/strategy setting.

a. Determination of priority scale.

b. Qualitative evaluation (general criteria).

c. Quantitative evaluation.

After the assessment, the next steps are among

these:

1. Rescheduling.

Bank Syariah Mandiri Sidoarjo does not carry

out rescheduling of murabaha contracts, because

the installment of murabaha transaction is a fixed

installment, which if it is done the extension will

decrease its installment. While rescheduling is a

handling of non-performing financing by

changing the time period without changing the

number of installments (Aktanto, interview, July

8, 2015).

2. Reconditioning.

Reconditioning is the process of restructuring

handling by changing installment schedule and

installment amount (Aktanto, interview, June 11,

2015). Under BSM's NPF settlement policy,

reconditioning is a rescue of financing by

altering part or all of the financing requirements,

not only on changes to the financing schedule,

duration and/or other terms as long as it does not

concern the maximum change of financing.

These changes include rescheduling of principal

installments and profit/margin sharing, margin

determination, profit sharing, lower bank fees

and penalties, self financing review to be met

and changes to other financing requirements

(including collateral exchange).

3. Restructuring.

According to Bank Syariah Mandiri's NPF

policy, restructuring is an effort by banks to

restructure the financing so customers can meet

their obligations. Restructuring in Sharia Banks

is the process of handling NPF by changing the

number of installments of financing.

Restructuring of Non-Performing Financing of Murabaha Contracts in Sharia Banks

Restructuring can be done for customers who

still have good faith to pay off their obligations,

based on quantitative verification it is the best

alternative.

Restructuring of bank financing is done to ease

the customer in the payment of obligations.

Restructuring can be done in three ways, namely

rescheduling, reconditioning, and restructuring.

Bank Syariah Mandiri Sidoarjo carries out these

three handlings of non-performing financing based

on Bank Indonesia regulation and Bank Syariah

Mandiri NPF policy.

The implementation of rescheduling and

reconditioning is in accordance with Bank Indonesia

Regulation no. 13/9/PBI/2011 and Bank Indonesia

Circular Letter no. 13/18/DPbS, which is to change

the installment schedule and the number of

installments.

Implementation of restructuring is based on Bank

Indonesia Regulation no. 13/9 / PBI / 2011 and Bank

Indonesia Circular Letter no. 13/18 / DPbS, where

restructuring is a change of financing requirements

which in practice at BSM Sidoarjo is done by

changing the installment amount without changing

the schedule of the graduation.

The execution of the salvation is in accordance

with the Qur'an verse of the letter of Al Baqarah (2)

verse 280 which means "And if (the debtor is) in

distress, so give respite until He widen. and charity

(some or all of that debt), it is better for you, if you

know." (Ministry of Religious Affairs, 1998: 87)

As well as the Hadith of the Prophet

Muhaammad Pbuh, "The one who releases a Muslim

from the troubles of the world, Allah will release his

troubles on the Day of Resurrection; and Allah

always helps His servant as long as she (loves) to

help her brother " (Muslim).

5 CONCLUSION

Based on the results of research conducted, the

conclusions obtained include:

1. Implementation of restructuring NPF of

murabaha at Bank Syariah Mandiri Sidoarjo shall

be conducted after assessment of the customer

and stated that the customer has good faith and

good business prospect and financial condition of

the customer.

2. Implementation of restructuring NPF of

murabaha at Bank Syariah Mandiri Sidoarjo is

by reconditioning and restructuring.

3. The implementation of rescheduling and

reconditioning in accordance with Bank

Indonesia Regulation no. 13/9/PBI/2011 and

Bank Indonesia Circular Letter no. 13/18/DPbS,

and Fatwa DSN MUI No. 48/DSN-MUI/II/2005

is to change the installment schedule and

installment amount, yet in practice rescheduling

for murabaha financing can not be done.

4. Implementation of restructuring is based on Bank

Indonesia Regulation no. 13/9/PBI/2011 and

Bank Indonesia Circular Letter no. 13/18 / DPbS,

where restructuring is a change of financing

requirements which at BSM Sidoarjo is done by

changing the installment amount without

changing the schedule of the graduation.

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