ISLAMIC BANKING (Perbankan Islam)
A PAPER OF
ISLAMIC BANKING
This Paper was submitted to complete one of the group tasks English
Study
English Lecturer :
Ceceng Salamudin, M.Ag
Arranged by:
Group 5
Ahmad Nurmajid
Lilis Siti Sopiah
Muhammad Hasbullah
Siti Napisah
Wildan Haetami
ISLAMIC
EDUCATION DEPARTMENT
SEMESTER
III
ISLAMIC
UNIVERSITY AL-MUSADDADIYAH GARUT
2018-2019
PREFACE
Bismillahirrohmanirrohim
Praises and syukur to Allah SWT who has the blessing and the glory.
Shalawat and salam are always delivered to our Prophet Muhammad SAW, his family,
Thabiin Atbaut Thabiin, and his followers.
This paper set up by the compiler with various obstacles. Whether
it came from self constituent or who come from outside. But with patience and
especially the help Allah SWT finally this paper by tittle “ ISLAMIC BANKING
“ can be resolved.
Authors also thank the English lecturers who have helped making up
to finish this paper.
Hopefully this paper can provide a broader insight to the reader.
Although this paper has advantages and disadvantages. Authors beg for advice
and criticism. Thank you.
Garut,
September 2018
Author
TABLE OF CONTENT
PREFACE ..................................................................................................... i
TABLE OF CONTENT .............................................................................. ii
CHAPTER I INTRODUCTION
A.
Background
........................................................................................ 1
B.
Problem
Identification ........................................................................ 1
C.
Writing
Purposes ................................................................................ 2
D.
Writing
Benefit.................................................................................... 2
CHAPTER II DISCUSSION
A.
The
Definition of banking................................................................... 3
B.
The
Definitions and Basic concepts of conventional banking............ 3
C.
The
Definition of Islamic Banking...................................................... 3
D.
The
Concept of Islamic banking.......................................................... 4
E.
The
advantages and disadvantages of Islamic banking...................... 7
F.
The
comparison between conventional banks and Islamic banking.... 9
CHAPTER II FINAL
A.
Conclusion.......................................................................................... 11
B.
Suggestion.......................................................................................... 11
REFERENCES
CHAPTER I
INTRODUCTION
A.
Background
In general, the
definition of Islamic Bank (Islamic Bank) is a bank whose operations are
adjusted to the principles of Islamic law. Currently many terms are given to
refer to Islamic Bank entities other than the term Islamic Bank itself, namely
Interest-Free Bank, Lariba Bank (Lariba Bank), and Syari'ah Bank (Shari'a
Bank). As will be discussed later, in Indonesia technically the juridical
mention of Islamic Banks uses the official term "Sharia Bank", or which
is completely called "Sharia Based Bank".
Indonesian
Banking Law, namely Law No. 7 of 1992 concerning Banking as amended by Law No.
10 of 1998 (hereinafter for the purposes of this paper abbreviated as UUPI),
distinguishes banks based on their business activities into two, namely banks
that carry out conventional business activities and banks that carry out
business activities based on sharia principles.
B.
Problem Identification
1.
What
is the Meaning of banking ?
2.
What
are the Definitions and Basic concepts of conventional banking?
3.
What
is the Definition of Islamic Banking ?
4.
What
is the concept of Islamic banking ?
5.
What
are the advantages and disadvantages of Islamic banking ?
6.
How
is the comparison between conventional banks and Islamic banking?
C.
Writing Purpose
1.
To
Know the Meaning of banking
2.
To
Know the Definitions and Basic concepts of conventional banking
3.
To
Know the Definition of Islamic Banking
4.
To
Know the concept of Islamic banking
5.
To
Know the advantages and disadvantages of Islamic banking
6.
To
Know the comparison between conventional banks and Islamic banking
D. Writing Benefit
As for the results of
making this paper, it is expected to obtain the following benefits:
1.
It
is theoretically expected to provide scientific and scientific contributions in
education.
2.
Practically
can know about Islamic Banking: Definition of
banking ; Definitions and Basic concepts of conventional banking; Definition of
Islamic Banking; Concept of Islamic banking; Advantages and Disadvantages of
Islamic banking ; and Comparison between conventional banks and Islamic banking.
CHAPTER I
DISCUSSION
A.
The Definition of Banking
In general
terms, the business activity of accepting and safe guarding money owned by
other individuals and entities, and then lending out this money in order to earn
a profit. A bank is a financial institution and a financial intermediary that
accepts deposits and channels those deposits into lending activities, either
directly by loaning or indirectly through capital markets. A bank connects
customers that have capital deficits to customers with capital surpluses.
Due to their influence within a
financial system and an economy, banks are generally highly regulated in most
countries. Most banks operate under a system known as fractional reserve
banking where they hold only a small reserve of the funds deposited and lend
out the rest for profit. They are generally subject to minimum capital
requirements which are based on an international set of capital standards,
known as the Basel Accords.
B.
The Definition and Basic Concept of Conventional Banking
According to
Law No. 10 of 1998, Conventional Bank is a bank conducting conventional
business activities in providing payment services activities. Conventional
banking is essentially based on the debtor-creditor relationship between the
depositors and the bank on one hand, and between the borrowers and the bank on
the other. Interest is considered to be the price of credit, reflecting the
opportunity cost of money.
C.
. The Definition of Islamic Banking
An Islamic
banking system is based on the principles of Islamic law (also known Shariah)
and guided by Islamic economics. Two basic principles behind Islamic banking
are the sharing of profit and loss and significantly, the prohibition of the
collection and payment of interest. Collecting interest is not permitted under
Islamic law.
Islamic banking
(or participant banking) is banking or banking activity that is consistent with
the principles of sharia law and its practical application through the
development of Islamic economics. Sharia prohibits the fixed or floating
payment or acceptance of specific interest or fees (known as riba, or usury)
for loans of money. Investing in businesses that provide goods or services
considered contrary to Islamic principles is also haram (sinful and
prohibited). Although these principles have been applied in varying degrees by
historical Islamic economies due to lack of Islamic practice, only in the late
20th century were a number of Islamic banks formed to apply these principles to
private or semi-private commercial institutions within the Muslim community.
D.
The Concept of Islamic Banking
An Islamic bank
is a bank for operating results with the principles of Islamic Shari'a. In its
operations, Islamic banks follow The Qur'an and Hadith rules and regulations of
the government. Islamic Bank are banks Based on the principle of partnership,
fairness transparency,and universal and conduct banking operations based on
Islamic principles. Activities of Islamic banks are the implementation of
Characteristics of Islamic economic principles, as follows: prohibition of
usury in its various forms, does not recognize the concept of valuetime than
money (time value of money), the concept of currency exchange atat sabagatnot
as komaditas, not allowed to engage in activities thatspeculative, not allowed
to use the two prices for onegoods, the two transactions are not allowed in the
contract.
Islamic Sharia
principles in the management of property emphasizesbalance between the
individual and society, in which wealth ashould be used for these things
especially productive investment activitieswhich is the foundation of economic
activity in the community students. InWhere a contract transactions in
accordance with Islamic principles when they have beenmeet all the following requirements:
1.
The
transaction does not contain elements of tyranny
2.
Not
usury
3.
No
harm to the self or others
4.
No
scams
5.
Contains
no material that is forbidden
6.
Does
not contain elements of gambling.
According to
the 1998 Banking 10 Article 1.13. Sharia Principles are described as rule by
Islamic law agreement between the bank and others to deposit funds and
financing activitiesbusiness, or other activity expressed in accordance with
sharia, among others.
1.
Principle
of Profit Sharing / Mudharabah
Mudharaba is a partnership between two parties in which The first
provide funding, and the secondis responsible for managing the business. Profit
distributed according to income ratio has made agree together advance, when the
loss of owner things will lose somerewards of hard work and managerial skills
(managerial skills) during the project.
2.
Principle
of Musharokat
Musharokat is a partnership between two or more parties in a
project in which each party entitled to all benefits and responsible for the
loss that occurs inaccordance with theits shares respectively.
3.
Principle
of Murabahah
One of the advantages and ease muamalah in Islam is various forms
of sale contract. Forms sale and purchase agreement spelled Islamiyah
jurisprudence drawing this very much, the number could reach dozens.Based on
the comparison of the selling price with the purchase price can be grouped as
follows:
a.
Al-Mushawamah,
the regular sale where the seller put prices without telling the buyer what the
profit margintaken.
b.
At-Tauliyah, which sold for a purchase price
without takingbenefit at all as if the seller makes the buyer as guardian
(tauliyah) on goods or assets.
c.
Al-Murabahah,
which is a form of a purchase and sale agreement must comply with the rules and
'nukum applicable general salein muamalah Islamiyah. Trading of 'al Murabahah
is one Islamic concept of doing a sale and purchase agreement. This concept has
been widely used by Islamic banks and financial institutions.
4.
The
Principle of al-Wadi 'ah (Deposit I Courier)
Al-Wadiah can be interpreted as a deposit of one party to the other
party,both individuals and legalentities that should be preserved and
restoredwhenever thee depositor will. In this case there are twotypes of
al-Wadi 'ah, namely :
a.
Wadi
'ah Yad al-Amanah
Care is an agreement in which the storage is notresponsible for
damage or shortage of goodssaved thatis not caused by an act or omissionstore
b.
Wadi
'ah Yad al- amanah
Care is an agreement whereby the parties with or without
permissionthe owner of the goods can bedeposited memanfairkan goods
andbertanggungiawab for damage or loss of goodssaved, all thebenefits in the
use of goodsis the right of the borrower.
5.
Principle
of ljarah
ljarah is a contract for the transfer of goods or services, through
thepayment of wages, rents, withoutbeing followed by the transfer of
ownershipthe item itself. Broadly divided into three forms:
a.
Ijarah
Mutlagoh
Mutlaqoh ljarah or leasing is the leasing processcommon in everyday
economic activities. Experts mutlagoh ljarah Islamic law divides into two
forms: Renting for a certain period and hiring for a project / specific business.
The first form is widely applied in the lease goods / asset was last used to
hire workersor expert for specific businesses.
b.
Ijarah
wa lqtina
That is a form of lease contract, which ended with the sale
orrather the lease contract, which endedwith the ownership of the goodshands of
tenants. The nature of the transfer is the difference ijarah usual. Under this
contract lease payments has been accounted for such that most purchases of
goods gradually apply
E.
The Advantages and Disadvantages Of Islamic Banking
Islamic banking is a new way of
financial intermediation and investment management that has emerged and gained
a sizeable share of the market in its home base, the Persian Gulf countries.
Islamic banking has popularised itself in Malaysia, Indonesia and the Americas,
and a number of Muslim countries have adopted the new system at the state
level. Healy Consultants believes that Islamic banking brings forth many
advantages and thus provides Islamic banking services. Below are listed the
advantages and disadvantages of Islamic banking:
1.
Advantages
of Islamic Banking
a.
Islamic
banking is becoming a very popular amongst international investors. Having
committed itself to a text accessable to all and Prophetic precedents available
easily, Islamic banking is open to any innovations that are in congruence with
its fundamentals. It is nota closed system. It has no regional, ethnic or class
affiliations.
b.
In
Islam banking, only one kind of loan and that is qard-el-hassan (literally good
loan) whereby the lender does not charge any interest or additional amount over
the money lent.
c.
In
Wadiah (safekeeping), a bank is deemed as a keeper and trustee of funds. A
person deposits funds in the bank and the bank guarantees refund of the entire
amount of the deposit, or any part of the outstanding amount, when the
depositor demands it.
d.
Islamic
banking is more efficient in that it allocates investable funds on the basis of
the expected value productivity of projects rather than on the criterion of the
creditworthiness of those who own the projects, which is the case in debt-based
finance
e.
Islamic
banking is less prone to inflation and less vulnerable to speculation which is
currently being fueled by the presence of huge quantities of debt instruments
in the market.
f.
Islam
encourages people to invest their money and to become partners in order to
share profits and risks in the business instead of becoming creditors. As
defined in the Shari'ah, or Islamic law, Islamic finance is based on the belief
that the provider of capital and the user of capital should equally share the
risk of business ventures, whether those are industries, farms, service
companies or simple trade deals.
2.
Disadvantages
of Islamic Banking
a.
Investments
should onlysupport practices or products that are not forbidden or considered
unlawful, or haraam, by Islamic law. Trade in alcohol, for example would not be
financed b an Islamic bank; a real-estate loan could not be made for the
construction of a casino; and the bank could not lend money to other banks at
interest.
b.
Money
is only a medium of exchange, a way of defining the value of a thing; it has no
value in itself, and therefore should not be allowed to give rise to more
money, via fixed interest payments, simply by being put in a bank or lent to
someone else.
F.
The Comparison between Conventional and Islamic Banking
One must
refrain from making a direct comparison between Islamic banking and
conventional banking (apple to apple comparison). This is because they are
extremely different in many ways. The key difference is that Islamic Banking is
based on Shariah foundation. Thus, all dealing, transaction, business approach,
product feature, investment focus, responsibility are derived from the Shariah
law, which lead to the significant difference in many part of the operations
with as of the conventional.
The foundation
of Islamic bank is based on the Islamic faith and must stay within the limits
of Islamic Lavw or the Shariah in all of its actions and deeds. The original
meaning of the Arabic word Shariah is the way to the source of life' and is now
used to refer to legal system in keeping with the code of behaviour called for
by the Holly The Qur'an (Koran). Among the governing principles of an Islamic
bank are :
1.
The
absence of interest-based (riba) transactions;
2.
The
avoidance of economic activities involving oppression (zulm)
3.
The
avoidance of economic activities involving speculation (gharar);
4.
The
introduction of an Islamic tax, zakat;
5.
The
discouragement of the production of goods and services which contradict the
Islamic value (haram).
On the other
hand, conventional banking is essentially based on the debtor-creditor
relationship between the depositors and the bank on one hand, and between the
borrowers and the bank on the other Interest is considered to be the price of
credit, reflecting the opportunity cost of money.
Islamic law
considers a loan to be given or taken free of charge, to meet any contingency.
Thus in Islamic Banking, the creditor should not take advantage of the
borrower. When money is lent out on the basis of interest, more often it leads
to some kind of injustice. The first Islamic principle underlying for such kind
of transactions is "deal not unjustly, and ye shall not be dealt with
unjustly" [A-Baqarah:279] which explain why commercial banking in an
Islamic framework is not based on the debtor-creditor relationship.
The other
principle pertaining to financial transactions in Islam is that there should
not be any reward without taking a risk. This principle is applicable to both
labor and capital. As no payment is allowed for labor, unless it is applied to
work, there is no reward for capital unless it is exposed to business risk.
Thus, financial
intermediation in an Islamic framework has been developed on the basis of the
above-mentioned principles. Consequently financial relationships in Islam have
been participatory in nature.
CHAPTER
III
FINAL
A.
Conclusion
Islamic banking
(or participant banking) is banking or banking activity that is consistent with
the principles of sharia law and its practical application through the
development of Islamic economics. Sharia prohibits the fixed or floating
payment or acceptance of specific interest or fees (known as riba, or usury)
for loans of money. Investing in businesses that provide goods or services
considered contrary to Islamic principles is also haram (sinful and
prohibited). Although these principles have been applied in varying degrees by
historical Islamic economies due to lack of Islamic practice, only in the late
20th century were a number of Islamic banks formed to apply these principles to
private or semi-private commercial institutions within the Muslim community.
B. Suggestion
Through the review of
material about Islamic Banking, the reader is expected to know and understand
about that. So, we will always carry out Banking in
accordance with the provisions of Islamic teachings, purify a marriage bond as
a form of worship to God and maintain the Islamic Banking bond of all things
that invite God's wrath to remain holy.
REFERENCES
Ceceng,
Salamudin, M.Ag.2018. English
III (English for Islamic Studied.) Garut.
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