Category: Economics and Islamic Finance



1.Who is Hakim (The Lawgiver)? 2.What is Mahkum Fiih (The Act)? And what are its classifications? 3.Mahkum ‘alaih (The Subject/Mukallaf) 4.Ahliyah (Legal Capacity) and its obstacles:

A.  Samawiyah (Natural Causes)

•Sighar (Minority) •Junun (Insanity) •‘Atah (Idiocy) •Naum wa ighma’ (Sleep and fits of fainting) •Nisyan (Foregtfulness) •Maradh al-maut (Death-illness)

B.  Muktasabah (Acquired Causes)

•Sukr (Intoxication) •Hazl (Jest) •Safah (Indiscretion) •Ikrah (Coercion and duress) •Khata’ wa Jahl (Mistake and Ignorance) •1. Who is Hakim (The Lawgiver)?

In the Islamic law the only Lawgiver is Allah. Allah is the True source of all laws.

Inil hukmu illaa liLlah (The hukm belongs to Allah alone) (Quran 6:57)

Alaa lahul hukm (surely His is the hukm) (Quran 6:62)

Whoever did not judge by what Allah revealed, those are they that are the unbelievers, because except Him there is no one has the authority of making law.

The task of all prophets is delivering the laws of Allah, while the task of all mujtahidin is understanding them by the methodology and principles of Ushul Fiqh.

•2. What is Mahkum Fiih (The Act)? And what are its classifications?

Mahkum fiih: The act to which the hukm is related.

The condition of the act:

1.The act to be performed or avoided must be known. 2.The subject (mukallaf) should be able to perform the act.

The nature of the act and its classification:

The act to which the hukm is related maybe for the common interest or for the specific one.

If it is for the common interest then it is haqq Allah (the Right of Allah) like ibadah mahdhah (pure worship), hudud, kaffarat and sadaqatul fitr etc.

And if it is for the specific interest then it is haqq al-’abd (the right of the individual) like ta’zir.

And if the right of Allah and the right of the individual lie side by side, but the right of Allah is predominant then it is like hadd al-qadhaf (the punishment of accusing another for having unlawful sexual intercourse).

And if the right of Allah and the right of the individual lie side by side, but the right of the individual is predominant then it is like qisas (retaliation for bodily injuries or culpable homicide amounting to murder).

•3. Mahkum ‘alaih (The Subject)

Mahkum ‘alaih: The person whose act invokes a hukm.

He is known as the Mukallaf (Subject). Mukallaf is a person who possesses ahliyah (legal capacity), whether he acts directly or through delegated authority.

•4. Ahliyah (Legal Capacity) and its obstacles:

Ahliyah is the ability or fitness to acquire rights and exercise them and to accept duties and perform them.

The types of ahliyah:

1.Ahliyah al-wujub: The capacity for acquisition of rights. 2.Ahliyah al-adak: The capacity for execution or performance of duties.

The obstacles of ahliyah:

A.  Samawiyah (Natural Causes)

B.  Muktasabah (Acquired Causes)

•A.  Samawiyah (Natural Causes)
1. Sighar (Minority)

Sighar (minority) is the state or condition of a human being after birth and before puberty.

The sabiyy (minor) is liable for compensation of property destroyed by him, for goods and services bought, for maintenance of relatives and also for zakat.

The minor is not liable for the ibadat, for financial transactions and for punishments.

•2. Junun (Insanity)

The insane person is liable for destruction of property and payment of diyah.

The insane person has no liability for ibadat or punishments and all his transactions are void.

•3. ‘Atah (Idiocy)

It is a state in which a person at times speaks like a sane and normal person, while at others he is like a madman.

The capacity of an idiot is deemed equivalent to that of a sabiyy mumayyiz (the discriminating minor), who can be permitted by his guardian to undertake some transactions.

•4. Naum wa ighma’ (Sleep and fits of fainting)

Sleep and fits do not effect ahliyah al-wujub.

There is no liability for punishments and transactions.

•5. Nisyan (Foregtfulness)

Forgetfulness does not affect ahliyah al-wujub nor does it affect the capacity for execution.

•6. Maradh al-maut (Death-illness)

This is a condition in which the mind of a sick person is dominated by the fact that he will die because of his illness.

Maradh al-maut has no effect on the capacity for acquisition and the capacity for execution.

B.Muktasabah (Acquired Causes)
1. Sukr (Intoxication)

Drunkenness is a state caused in a human being due to the use of an intoxicant, which temporarily suspends the proper functioning of the mental faculty.

Intoxication does not cause a change in the capacity for acquisition. However, the capacity for execution is negated in the case of the drunken person by the state of drunkenness.

•2. Hazl (Jest)

Hazl or jest has no effect on the capacity for acquisition and the capacity for execution.

This based on the tradition that says: “Three things intended seriously are taken seriously, and if intended in jest are taken seriously: marriage, divorce, and the freeing of a slave”.

•3. Safah (Indiscretion)

This defect concerns financial transactions, that is, transactions undertaken carelessly and in a manner that a prudent person is likely to avoid.

The effect of safah is that a person, who has attained puberty, is subjected to hajr (interdiction) till such time that he mends his ways.

•4. Ikrah (Coercion and duress)

Ikrah is a situation in which one is forced to do something without his willingness.

Ikrah has no effect either on the capacity for acquisition or the capacity for execution, because this state does not affect life or reason and discretion. It does, however, negate free consent and willingness.

•5. Khata’ wa Jahl (Mistake and Ignorance)

Jahl (Ignorance) of law does not negate the capacity of acquisition and the capacity of execution. However, some times jahl can be ‘udzur (a reason).

Jahl may be within the dar al-Islam (Islamic state) or within dar al-harb (enemy territory).

Jahl of the law that has been established in the Qoran, Sunnah and Ijma’) within the dar al-Islam does not become  ‘udzur (a reason), because knowing the law within it is obligatory.

And jahl of the law within dar al-Harb becomes a reason, because this place is the place of ignoring the law.

Khata’ does not negate the capacity for acquisition and the capacity for execution. However, it can become ‘udzur (a reason), for example, the mistaken divorce is void.




1.  The meaning of Hukm

2.  Classification of Hukm:

A.  Hukm Taklifi (Obligations and Duties)

1.  Wajib (Obligatory Act)

2.  Sunat (Recommended Act)

3.  Haram (Prohibited Act)

4.  Makruh (Disapproved Act)

5.  Mubah (Permitted Act)

6.  Azimah (Initial Rules) and Rukhsah (Exemption)

B.  Hukm Wad’i (Declaratory Rules)

1.  Sabab (Cause)

2.  Syarth (Condition)

3.  Mani’ (Obstacle)

4. Shihhah and Buthlan (Validity and nullity)

•1.  The meaning of Hukm


= A command

> A rule

> A communication from Allah, the Exalted, related to the acts of the subjects through a demand or option or through a declaration.

• • • •2.  Classification of Hukm

A.  Hukm Taklifi (Obligations and Duties): The obligation-creating rule

B.Hukm Wad’i (Declaratory Rules): A rule that facilitates the operation of the obligation-creating rule or it explains the relationship between different obligation-creating rules.

• •
A. Hukm Taklifi
(The obligation-creating rule)
1.  Wajib (Obligatory Act)

Wajib: An act whose commission is demanded by the Lawgiver in certain and binding terms.

The classifications of Wajib:

1.Wajib mutlaq (Obligatory act independent of time) like the payment of expiation (kaffarat) in nadzr, and wajib muqayyad/muwaqqat (Obligatory act limited by time) like dhuhur prayer and hajj. 2.Wajib muhaddad (Determinate obligatory act) like the five daily prayers and the amount of zakat and wajib ghair muhaddad (indeterminate obligatory act) like spending in the way of Allah and feeding the needy. 3.Wajib ‘aini (The universal obligatory act) like prayers, fasting and zakat and wajib kifa’i (The communal obligatory act) like answering the salam and prayer for mayyit. 4.Wajib mu’ayyan (The specified obligatory act) like prayer and fasting and wajib mukhayyar (The unspecified obligatory act) like the kaffarah (expiation) for breaking the oath: feeding ten needy persons, or clothing them, or the freeing of a slave. •2.  Sunat (Recommended Act)

Sunat/Mandub: A demand by the Lawgiver for the commission of an act without making it binding and without assigning any blame for its omission.

The types of sunat:

1.Sunat muakkadah (The emphatic recommended act) like praying two rakaat before Subuh prayer, or after Dhuhur, Maghrib and Isya’. 2.Sunat ghair muakkadah (Non-emphatic recommended act) like giving sadaqah to the poor. •3.  Haram (Prohibited Act)

Haram: An act whose omission is required by the Lawgiver in binding and certain terms.

The types of Haram:

1.Haram lidhatih (Prohibited for itself) like unlawful sexual intercourse and theft. 2.Haram lighairih (Prohibited for an external factor) like fasting in ‘Id day and the sale that involves riba. •4.  Makruh (Disapproved Act)

Makruh: An act whose omission is demanded by the Lawgiver in non-binding terms whatever the type of evidence.

The types of Makruh:

1.Makruh tahrim: An act whose omission has been demanded by the Lawgiver in certains, through a probable evidence. Like making a proposal for marriage where the proposal of another is awaiting respons and making an offer for sale where the offer of another is pending. 2.Makruh Tanzih: An act whose omission is demanded by the Lawgiver in non-binding terms whatever the type of evidence from which it arises. Like sale at the time of the Friday congregational prayer. •
5.  Mubah (Permitted Act)

Mubah/halal: An act in which the Lawgiver has granted a choice of commission or omission, without blame or praise for commission or omission. Like eating, drinking and watching TV.

6.  Azimah (Initial Rules) and Rukhsah (Exemption)

Azimah: An obligation imposed initially as a general rule. Like performing prayer as ordered by Allah.

Rukhsah: An exemption from the general rule. Like tayammum and not fasting in Ramadhan because of journey.

B.Hukm Wad’i (Declaratory Rules)
1. Sabab (Cause)

Sabab (The Cause of the hukm): The cause on the basis of which a primary rule or hukm taklifi is invoked or is established.

Examples: The setting of the sun is a cause for the obligation of Maghrib prayer. The beginning of Ramadhan is a cause for the obligation of fasting. A journey is a cause for the permissibility of not fasting.

•2.  Syarath (Condition)

Syarath (A necessary condition for a hukm): A sign or an indication on which the existence of another thing depends.

Examples: Ablution is a condition for prayer. The presence of witnesses is a condition for the marriage contract.

3.  Mani’ (Obstacle)

Mani’ (Obstacle): A factor whose existence indicates the negation of a hukm or its sabab.

Examples: The negation of the hukm of retaliation when the accused is the father of the victim.

•4. Shihhah and Buthlan
(Validity and nullity)

Shihhah: The act that is fulfilled its rukn (basic necessary) and syarath (condition). Like performing prayer by fulfilling its rukn and syarth.

Buthlan: The act that is not fulfilled its rukn (basic necessary) or syarath (condition). Like performing prayer without reading al-Fatihah or without doing the ablution.


1.  The Definition Of Ushul Fiqh

2.  Distinction between Fiqh And Ushul Fiqh

3. The Goals of Studying Ushul Fiqh

4. The Urgency of Ushul Fiqh nowadays

5.  The Method Of Studying Ushul Fiqh

6.  The Scope Of Ushul Fiqh

•1.  The Definition Of Ushul Fiqh


1. dalil  =evidence/proof

2. asas  =foundation

3. mustashhab  =original rule

4. qa’idah  = a general principle


= Al-Fahm al-daqiq= A deep understanding

> It is the knowledge of the shar’i ahkam (legal rules), pertaining to conduct, that have been derived from their specific evidences.

Ushul Fiqh>

= They are the principles by the use of which the Mujtahid derives the legal rules of conduct from the specific evidences.

•2.  Distinction between Fiqh And Ushul Fiqh

The goal of studying fiqh and ushul fiqh is the same i.e. deriving the legal rules of conduct, however, ushul fiqh explains the methods of concluding the legal rules, while fiqh concludes them based on the methods that have been described by ushul fiqh.

•3. The Goals of Studying Ushul Fqih 1.To know the basics of the mujtahid. 2.To study principles that needed by the Mujtahid. 3.To know the sources of the hukm Shar’i. 4.To be able to conduct muqaranatul madzahib al-fiqhiyah (comparative study on legal cases) 5.To derive the legal rules of conduct from the specific evidences. ● •4. The urgency of Ushul Fiqh nowadays 1.Ijtihad is still needed, because the texts of the Qoran and the Sunnah are limited while human being’s activities are not limited. And ijtihad can not be done without ushul fiqh. 2.Ushul fiqh is also needed by those who are not able to do ijtihad for knowing the defects of the ulamas views and their basic madzhab (school). 3.Ushul fiqh is needed by those who want to know the legal rules and also who are in charge in the conventional legislation.   •5.  The Method Of Studying Ushul Fiqh

1. The method of Mutakallimun: Based on the making of jurisprudencial principles that strengthened by proofs without paying attention to their suitability or insuitability with the furu’ fiqhiyah (legal cases) which come from ulamas.

Books based on this method: al-Burhan by Imam al-Haramain, al-Mustasfa by al-Ghazali and al-Mu’tamad by Muhammad bin ali al-Basri.

2. The method of Hanafi: Based on the making of jurisprudencial principles that strengthened by proofs with paying attention to their suitability with the furu’

• •

fiqhiyah (legal cases) which come from ulamas.

Books based on this method: al-Ushul by al Jashshosh, al-Ushul by al-Dabbusi and al-Ushul by al-Bazdawi.

3. The combined of two methods above: Based on the making of jurisprudencial principles that strengthened by proofs some times with paying attention to their suitability or insuitability with the furu’ fiqhiyah (legal cases) which come from ulamas.

Books based on this method: Badi’ al-Nidhom by al-Sa’ati al-Hanafi, al-Tanqih wa syarhuh al-Taudhih by sadr al-Syari’ah and Syarh al-Taudhih by al-Taftazani al-Syafi’i.

•6.  The Scope Of Ushul Fiqh
1.The Hukm shar’i (Islamic Law). 2.The sources of the Hukm shar’i. 3.The methods of deriving the Hukm shar’i. 4.The mujtahid (who derives the Hukm shar’i). •


Case Study

Because of fear to be separated with her children, a woman who was married foreigner was abused by her husband.

Almost Indonesian women who were married foreigner forced their self to get sexual abuse from their husband. They were in force to admitted those abuses because, they were afraid to be separated with their children which are born in those intra-citizenship marriage. Almost of them were afraid of the divorce. It was not merely divorcing, more over they were afraid to be separated with their children; consider if after divorcing the father who was not an Indonesian will take their children back onto their nation away. This problem what stressed women who were married with foreigner. Such that case was burdened Mrs. Imaniar, an Indonesian singer who just divorced with Singaporean man who was brought Mrs. Imaniar children back to Singapore.

According to Mrs. Imaniar’s confession, during her marriage with Singaporean man; they were faced a mass problems on the citizenships. “During our marriage, my ex-husband never cares about our family. My ex-husband always reasoning couldn’t work in Indonesia because of his citizenship and the most painful thing that he never realizes to be Indonesian people, therefore he need not to work”. Imaniar said. Imaniar also confessed that she was afraid to be separated with her children if her husband was deported.



Based on the case mentioned above, it can be conclude that the problem is “What is the children citizenship after their parent was divorced, and what about if there is no divorce among them? Should Imaniar lost her Indonesian citizenship?


Imaniar’s case is only the one from many cases around citizenships that suffering Indonesian women. There are many cases that take women in the guilty and crime because; they don’t realize that her children had foreign citizenship. For instance, somewhere that usually found the “kawin kontrak” (lease marring); the husband that stay in Indonesia during his lease marring and get his child born during his lease marring with Indonesian woman, and noticed his child as his son legally as foreigner. And after his lease marring is over, he leaves his son and his wife away, and return back to his nation.

Almost wife confusing, while the authorized officer asking about the legal certificates of her children which are in charge of her ex-husband as long as her marriage leasing. Finally, they were punished on hiding foreign citizen who is none other than his biological child. worse, there is the possibility that children were deported to their home country, not necessarily his father would recognize or accept the child. Another case is the famous case of threat of deportation by Samantha Deborah immigration office Bandung. Samantha is the daughter of Erna Wouthuysen with Arnold Johan from Dutch. Erna Wouthuysen custody of her child when the divorce is finally brought to Bandung. because of negligent care Erna residence permit agreement for Samatha, which of course is still the same nationality with his father, then-in-law could take away the time Samantha was still in the process of deportation and stay in the immigration office. See the case, the husband and then use this neglect as the inability to care for their children, Erna, and requesting that the Dutch court that Erna revoke custody of Samantha. fortunately, the court still ruled that Erna remains a trustee for Samantha.

other cases are suspected cases of domestic abuse against Manohara Odelia Pinot. Manohara has two citizenship whics are Indonesia (based on the ius sanguinis) and the United States (based on the ius soli). it is becoming increasingly complex because of his marriage to the son of the king kelantan, Malaysia. should, after getting married opsinya Manohara use rights.

The cases like the above is very much emerging before the Act no.12 of 2006 and Regulation No. 2 Year 2007 because the previous law there is no benefit for women and children from the marriage between the two countries. However, such cases may arise due to lack of public knowledge regarding the procedures to obtain Indonesian citizenship.


by the laws of republic of Indonesia number 12 year 2006 about the citizenship of the Republic of Indonesia, Article 1, paragraph 1, that citizens are citizens of a country defined by legislation. Next, in chapter 2 explained that the Indonesian citizenship are those indigenous Indonesian peoples and those other nations that ratified the law as citizens. Clearly, the things on citizenship in the 1945 Constitution stipulated in Article 26 of the definition of citizens, Article 27 of the position of citizens, and Article 28 of the rights of citizens. Have a clear status for one’s citizens are extremely important that the rights of citizens can be protected by the state and life becomes secure.


To determine one’s nationality there are 3 principles must be understood:

a. ius soli (the principle of birth)

This principle determines a person according to nationality or the place where he was born. This principle held by the British, Egyptian, American, etc.

b. ius sanguinis (the principle of descent)

According to this principle, which is determines, one’s nationality and descent according to the direction of the parent. This principle held by China.

Naturalization (kewarganegaraan)

People can become citizens of a State after taking steps certain legal. Usually, done as an adult. The discrepancies in determining the citizenship of a country can have two possibilities for a person that is:

Apatride (without nationality).

Bipatride (no dual citizenship).

Determine the citizenship status of a State, the government commonly uses stelsel stelsel active and passive. According active stelsel people should take measures specific legal citizenship to be recognized, whereas passive stelsel people who are in a country by itself considered to be citizens of the State without a specific legal action.

Based on the two stelsel above, a citizen of a country basically has the right options and repudiasi rights.

The right option is: the right to choose a nationality (in the active stelsel).

Repuidasi rights are: the right to reject a nationality (in stelsel passive).

In the history of Indonesia trip, arranged in citizenship issues:

Law No. 3 of 1946 (not applicable).

KMB December 27, 1949 (not applicable).

Act No. 62 of 1958 (not applicable).

Law No. 3 of 1976 (not applicable).

Act No. 12 of 2006.

Regulation No. 2 of 2007.

According to law No. 12 of 2006 the principle used in determining the nationality Indonesia are:

The principle of ius soli.

The principle of ius sanguinis.

The principle of single citizenship.

The principle of dual citizenship is limited (only applies to children up to age 18 years).

Excellence Act no earlier than 12:

Not sacrifice the national interest (example, limited dual citizenship until the age of 18 years).

Asas existence of maximum protection (preventing cases of lack of citizenship).

Recognizing the principle of equality before the law.

Non-discrimination (example, revocation of Proof of Citizenship of the Republic of Indonesia / SBKRI).

How to obtain Indonesian citizenship

How foreigners can become citizens in Indonesia? Course through the process of naturalization. There are two ways:

Naturalization usual: submit an application to the Minister of Justice and Human Rights through the local court office where he lives or at the Embassy of the Republic of Indonesia if permohonana abroad is written in Indonesian. If passed then he should take the oath and before the courts.

Naturalization Special: given to foreigners coming to the State merit.

Somebody could missed his citizenship because of:

  1. Get married with a foreign man
  2. Become a foreign soldier
  3. Nominated as child of foreigner
  4. Possessing a foreign passport


Republic of Indonesia is a country that practice the principle of ius sanguinis, (Article 4 character (b) to the character (h)) and ius soli which restricted (Article 4 character (i) to the character (m)) that not every people born in Indonesia become Indonesian citizen. For example, if both of his parents is a foreign citizen. But, a child born from a mixed marriage is an Indonesian citizen.

In case of Ilmaniar, a citizenship status of his child was an Indonesian citizen according to:

  1. Article 4 character (d)

“A child born by a legal marriage from a foreign citizen’s father and an Indonesian citizen’s mother”

  1. Article 21

“a child who has no attain yet the age of 18 (eighteen) or doesn’t getting married yet, has been and reside in Republic of Indonesia zone. From father or mother who acquire Republic of Indonesian citizenship is an Indonesian citizen automatically”

Singapore as a state that practice ius sanguinis principle creates a double-citizenship on every child born in it (bipatride). Indonesia practices a double-citizenship principle restrictively until 18 years old. After 18 years old or after marriage, ere the child is under obligation to choose one of his double-citizenship (option right). This matter was adjusted in Article 4 character (1) UU No. 12/2006.

Thereby, after legal divorcing, the child is in proper order to reside in Indonesia without there must be a deportation because he form a part of Indonesian citizen as well.

A household violence case (KDRT) in a mixed marriage also had been suffered by Manohara Odelia Pinot. Manohara has a double-citizenship that is as Indonesian citizenship (by ius sanguinis) and as American citizenship (by ius soli), this matter become more complicated case because of his marriage with the King’s prince of Kelantan, Malaysia. Actually, Manohara ought to use her option right. It is said that citizenship became a factor why the case gone slowly.

Government properly should socialize every law legislated by facilitating more access to laws so that the case such as that doesn’t has a space to potentially repeated.



A child born from Ilmaniar marriage with Singapore citizen has a double-citizenship. That is Singapore citizenship and Indonesian citizenship. Yet, in age 18 years, the child should choose one of his double-citizenship.


Government properly ought to socialize Laws No. 12 year 2006 so that there will be no Indonesian citizen who has to suffer household violence because of mixed marriage with a reason of citizenship.


Indonesia, Undang-Undang Dasar Negara Republik Indonesia Tahun 1945.

Indonesia, Undang-Undang Tentang Keimigrasian, UU No. 9 tahun 1992.

Indonesia, Undang-Undang Tentang Kewarganegaraan Republik IndonesiaNomor 12 Tahun 2006.


Study’s Background

“Pancasilla” was a well known principles since it declaration in 1st June 1945 by Soekarno. Pancasila is the national ideology, the principle of constitutions, and the tool to unify the compound civil of Indonesia. Principally, pancasila only some ideological concept but, it runs very urgent function as the national ideology. All constitutions, laws, and other regulations have to be referred on it. But is Pancasila consists of complete aspects of human life including religion and belief? IsPancasila “acceptable” and “suitable” for all civil society? Does our government apply this national ideology as well as in the ideal condition? The codetta of PKI (Indonesia Communist Party) in 1965, the codetta of DI-TII Darul Islam (DI) and Tentara Islam Indonesia (TII) in 1949-1954, and GAM (Gerakan Aceh Merdeka) defined that pancasila failed to be the most acceptable national ideology in Indonesia. However, in the development of Indonesia some scholars argue that the Indonesia government already applied the best in these ideologies. And others argue that the government violates these ideologies. This paper strives to define the urgency of the first principle ideology of Pancasila and the government’s violation of the first principle of Pancasila. In case, that the existence of Pancasila as the national ideology is unchangeable; because the change of it only caused into the new national instability.


1. Is Pancasila became the most acceptable and suitable national ideology of Indonesia?

2. Is the Indonesia government doing the best to apply Pancasila as the national ideology especially, the first ideology?

Purposes and Utilities of paper

1. Purposes

a) To identify the synchronies values of Pancasila and religion.

b) To analyze the application of first ideology in the development of Indonesia.

2. Utilities

a) For the writer: To fulfill the assignment for Civic Education study.

b) For the reader: To be a reference in the issues of Pancasila.


The existence of Pancasila and the first principle (Belief in the one and only God)

The importance of Pancasila and it relationship with the Islamic ideology

Pancasila as the national ideology is unchangeable; the principle purpose of Pancasila is to unify the complex society of Indonesian which is consisted of many religions, ethnics, and cultures. Actually, there are many influences of Islamic though in our national ideology but, concerning the complexity of religion in Indonesia the Islamic ideology which influenced on it is not explicitly written in textual context. The history recorded that the Islamic thought that consists of the truth, social justice, freedom, dignity and other humanities values come against colonialism. The spirit to get the Independency motivated the Islamic movements to take a part in the struggle to actualize Indonesian independency. Some prominent figure included Pangeran Diponegoro, Sultan Agung, K.H. Wachid Hasjim, Tengku Cik Dik Tiro, Teuku Umar, Cut Nyak Dien, etc. Have their own colors and inventions in the Indonesian Independency.

The history recorded that Islam is the most acceptable and popular religion in Indonesia before Hindu, Buddha, Christian, Catholic, and Konghucu. Islam welcomed warmly by almost local society in Indonesia since 1292 until now. Almost national patriots are a Muslim. These conditions indirectly influenced the government system since the Independence Day up to day included, the national ideology ofPancasila. Actually, the first principle of Pancasila “Belief in the one and only God” resulted from a very controversial process. The mainstreams notions of that time were to take Indonesia become an Islamic country or a Communist country. The roles of Islam in the past Indonesia was undoubted but, there were also major roles from the nationalists and non-Islam movement whose took a part in the government. The origin of the first principle of Pancasila was “… by the obligatory to apply the Islamic Syariah for the followers.” This is today known as “Piagam Jakarta” It also represented Islam as the major contributor for Indonesian Independency. It argued by some dominant Muslim figures was missing actualized because of the complexity of Indonesian society. It also represents Islam as the major contributor for Indonesian Independency. It resulted into a controversial condition at that time. The communists, nationalists, and even an Islamic national organization (Nahdhatul-‘ulama and Muhammadiyah) declaimed this idea. Human right and Indonesian complexness claimed as the major issue to opposite the Islamic ideology.Therefore, the first principle of Pancasila “Belief to the one and only God” was applying up today. This first principle pretended to be the representation of every existing religion and cultures in Indonesia. This ideology supposed to be the most effective and efficient tool to unify the Indonesian religion, ethnic, and cultures. Piagam Jakarta is the one instance of the relationship between Indonesian Ideology Pancasila and the Islamic thought.

The first principle of Pancasila “Belief to the one and only God”

The items of belief to the one and only God:

  • The Indonesian nation declares their belief and loyalty into the one and only God.
  • All Indonesian people belief and do loyal into the one and only God, it accordance with their own religions based on fear and civilized humanity.
  • Building the harmony among the members of religious community.
  • The religion and belief is a personal problem for every human being and the God.
  • Building the tolerance milieu and respect for the members of religious community to do their worships.
  • Do not force anyone to belief in a certain religion.

From these items all Indonesian people obligated to take a religion and almost Indonesian people do understand, respect, and tolerance each other.

Pancasila is an alternative ideology

The existence of religion and the members of religion community becoming a factual reality, it insist the public awareness to keep them in harmony. The entire members of religion community have to be aware that their live are in a compound beliefs and religions. Therefore, none can dominate each other.

The fact is that Indonesia consist of religions, ethnic, languages, islands, and culture. Each other has their different value. This heterogenic sociocultural environment needs a very neutral and accepted ideology to unify each other and Pancasila have and being accepted for it.

In its development, Pancasila or event the contents or the items of it have a warmly acceptance for almost Indonesian people. But, the classic and actual controversial issues always occur in the first principle of Pancasila.“Belief to the one and only God” becomes a very hot and controversial issue. For some community the term of belief to the one and only God is too general and aimlessly, it caused into the different multipurpose according to the personal point of views. It was remanding of the long historical event, when the Islamic community wanted to declare Indonesia as an Islamic country. The impact of it today turns on many Islamic politic parties, Christian politic party, formal and informal Islamic community. Those explicitly decline the first national Ideology of Pancasila, and caused into the disintegration of Indonesia.

Actually, the concept of Pancasila is the concept of multi-religions country. This concept ensures and secures for the entire religions community to do worship in peace and harmony. Even Pancasila is not a religion based country and also a secular country moreover an atheist country. Indonesia that declares Pancasila as it ideology is not a country which is sacralizes one of the religion and also do not recognizing atheism and secularism. Indonesia uses Pancasila to push and facilitate the members of religion community to do for their religion. The implementation of certain religion laws in the country is possible and the spirit of pluralism and believing in God is regulated and guaranteed by the government. There will be no public worries because the laws of religion only applied for it community. The concept of Pancasila decreases the supremacy of a religion into another. There will be no major and minor religion community.

The controversies of Pancasila

Pancasila as the national ideology becomes very controversial issue when it is not adopted from the pure spirits of Indonesia. Lately, known that the principles in Pancasila is definitely similar with the Zionism principles of Monotheism, Nationalism, Humanism, Democracy, and Socialism. Incase Bung Karno, Muh Yamin, and Soepomo adopted the principle of Zionism and Freemansonry. Moreover, that the religions which are admitted in Indonesia is not only Islam but, Christian, Catholic, Hindu, Buddha, and Konghucu. Those religion is not a monotheism but multi-theism except Islam which is only admits Allah as the one and only God.

In the early independence days Pancasila is not supposed to became a unifying ideology, moreover to accommodate the principles spirits of Indonesia “Bhineka Tunggal Ika”. Pancasila designed to intercept the actualization of Syari’ah Islam (the actualization of Islamic Country). Almost the nationalist and non-Muslim up to day extremely use Pancasilato intercept the member of Muslim to actualize and doing Syari’ah Islameven though syari’ah Islam especially applies only for it members.Pancasila becomes a political force for anti-Islam based on the spirit of Bhineka Tunggal Ika because of not only Indonesia itself that consist of multi-ethnic, religions, and cultures; the United States and Malaysia succeed to conserve their complexity without any Pancasila. And the fact US and Malaysia were more developed.

This argumentation strengthen by the first violation of Pancasila by Soekarno, He forced his struggle to equalize the Indonesian ideologies, cultures, and art. The ideology of NASAKOM (Nationalism, Religion, and Communism) forced to be applied in Indonesia and also the ideology of “seni gaya lekra”. Meanwhile, the religious community declared as the enemy of revolution. And also under the supremacy of the second president Soeharto who have done the same mistake more than 60 years.

The violation of the “Belief on the one and only God”.

The ideology of Pancasila admits and sacralizes the religions in the government system. It unnecessary to change this ideology with the ideology based in a certain religion because it was and always become the ideology of religion. Pancasila has no contradicted values with any religion. It just refers to the members of religion community to create a tolerance and harmonious relationship among each other. The force to standardize the authorities and the certain laws of religion for all members of community becomes the violation of Pancasila itself; because there are no existing religions in Indonesia which come in conflict.

There are five religions in Indonesia: Islam, Christian, Catholic, Hindu, and Buddha. Becomes very ridiculous even when the standard of truth and morality laid in a certain religion.


Pancasila is an ideal ideology to be applied in Indonesia which has very complexity of religions, ethnics, and cultures. If this ideology changed by the ideology of certain religion or ethnic will occurs into the public inconveniences. By understanding and implementing Pancasila in the correct ways will bring Indonesia into the glory. To build the sense of belonging in Pancasila it necessary to encourages the real implementation of the items of the first principle ideology of Pancasila. By doing respects and tolerance among the member of religions community.


Koentjaraningrat. 1980. Manusia dan Agama. Jakarta: PT. Gramedia.

Nopirin. 1980. Beberapa Hal Mengenai Falsafah Pancasila,Cet. 9. Jakarta: Pancoran Tujuh.

Notonagoro. 1980. Beberapa Hal Mengenai Falsafah Pancasila dengan Kelangsungan AgamaCet. 8. Jakarta: Pantjoran Tujuh.

Salam, H. Burhanuddin, 1998. Filsafat Pancasilaisme. Jakarta: Rineka Cipta






In the conventional economics especially in the liberal and capitalistic economics system it is only recognize the partnership that provides profits sharing mechanism and ignored the ethics. What if the economics activities or business not run as well as the hope? What if in the partnerships have some loss? These problems seems happened right now, when the capital economics system was collapse in last 2008 and suddenly the world change its direction in to the alternative economics system, that not only talking about profits sharing, but also talking about, the ethics, loss sharing, morality, fairness, social welfare, and economics justice. Islamic economics system might be recognized as the only alternative economics system for the world right now. In the general term, the Islamic economic system has some values instrument. That values instrument are; Zakat, the forbiddance of Usury, Islamic Economics partnership (Mudharabah, Musyarakah, Murabahah, Qard), Social insurance, and government interventions. As what written in the holy book, al-qur’an bellow:

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29. O ye who believe! eat not up your property among yourselves In vanities: but let there be amongst you traffic and trade by mutual good-will: nor kill (or destroy) yourselves: for Verily Allah hath been to you Most Merciful!


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24. (David) said: “He has Undoubtedly wronged Thee In demanding Thy (single) ewe to be added to His (flock of) ewes: truly many are the partners (in business) who wrong Each other: not so do those who believe and work deeds of righteousness, and How few are they?”…and David gathered that we had tried him: He asked forgiveness of His Lord, fell down, bowing (in prostration), and turned (to Allah In repentance).

Based on the qur’anic verses above it can be taken that, Musyarakah is one of the instruments of Islamic economics system. What is musyarakah, what is the different between musyarakah and mudharaba,  and how musyarakh works beneficially and fairly in the economic activity or business. These questions will be defined in the short paper below.

The Definitions of Musyarakah (Etymologically, and according to the Islamic law’s)

I.I Etymologically,

Etymologically musyarakah refers to an Arabic word شَرِكَ-يَشْرُكُ  syarikah شَرِكَةُ (partnership or cooperation) musyarakah is the general term of profits sharing work which is two or more parties are taking apart in the funding and management of the work, with several proportion that could be same or different. The profits that are obtained from musyarakah would be divided according on the parties’ agreement as well, and the loss would be shared based on the owners’ capital proportions. In general, any muasyarakah activities is based on the intentions and wills that come from each party which are taking apart in the business or economics activities to develop their assets together in several joint works.

And according to the Islamic law’s, musyarakah is the agreement among two parties or mare which are agreed to take apart in several works to obtain some profits. In Indonesia itself, musyarakah becomes so popular and offered in almost conventional and Islamic Banks. In the public assumption musyarakah is one of the Islamic economics instruments that provides more benefits and fairness for businesspeople even though non-Muslim businesspeople.

I.II Musyarakah and its applications and its laws

Partnerships (musyarakah) are permitted, it concluded from prophetic decision about partnership. In the history record When Muhammad pbuh is commended by God as a prophet, the peoples at that period already interacting each other in business and other economics activities by implementing partnerships and the honored prophet was not prohibited and allowed. Muhammad pbuh in the hadist qudsy recited from Abu Hurairah reference:

Allah ‘Azza wa jalla said: I’am the third party among two parties which are taking apart together as long as no one do not cheating each other. If one party cheats others, I’ll leave both of them.

(H.R. Abu Daud, al-Baihaqi, and ad- Darul quthni)

What if the partnership or musyarakah is ran with non-Muslims? The partnership that run with non-Muslims is permitted. Imam Muslim ever referred from Abdullah bin Umar that declare: “Rasulullah pbuh ever employed khaibar people (the Jewish) by sharing for the harvest of fruits and plants”.

To have any musyrakah it has to be concerned about the rules and the principles of musyarakah. Generally, musyarakah has some rules; bellow:

1. There must be an agreement, statements and acceptance (ijab and qabul) among the parties who take in part of the musyarakah activity.

2. The parties who have the agreement have to know and understand the laws (Islamic and positive laws), and concern on the things mentioned bellow:

a. Each party has to provide the funds and employment.

b. The parties have their own right to manage the musyarakahs’ assets in business period.

c. Each party is authorized to do musyarakahs’ activity in the consideration of their partner right without purposed human error.

d. A party is not allowed to use musyarakahs’ assets for their own profits.

After understanding about the rules of musyarakah, we have to fulfill the principles bellow:

1. Agreement (ijab-qabul) statement and acceptance.

2. The parties who taking apart in works has to be expert in Islamic and Positive laws.

3. The object of Musyarakah (capitals and employments)

When these principles already fulfilled, the musyarakah activity can be done directly or representatively.

I.III The kinds of Musyarakah

1) Syirkah Inan

Partnership of two parties or more, that contributes both in capital and taking apart in its management.

2) Syirkah Abdan

Partnership of two or more parties, that both parties only take action doing in management/work and have no contributions in the capital.

3) Syirkah Mudharabah

Partnership of two or more parties, which a party contributes for capital and other contributes in works or in the contrary.

4) Syirkah Wujuh

Principally, this partnership is similar as syirkah mudharabah. The different is in the contribution of public figure in its partnership.

5) Syirkah Mufawadhah

Partnership of two or more parties, which is the combination of all kinds of partnership mentioned above.

Overlapping utility, between globalization and Islamic thought with special references to Economic.

Febryan Mujahid Panatagama


This paper strives to acknowledge all readers that it is difficult to face globalization without a deep understanding of what the meaning of globalization is. Globalization is a challenge for all civilization especially for Islamic civilization. In my understanding of Islam, globalization has many contradicted values with Islamic thought involving sociocultural, economical, technological, and political values. But globalization is also needed in order to spread Islamic thought all over the world. The wrong perspective about Islam on the western world has to be neutralized. In the first part, I define about the meaning of globalization and the influence of Islamic civilization on it. In the second part, I explain about the history of Islamic finance since the era of Muhammad (pbuh) up today. Then, I explain about the development of Islamic banking in Indonesia and the identification of permitted and prohibited transaction based on the Islamic Jurisprudence. After that, I explain about Bait al-Maal wa al-Tanwil (BMT as the microislamic financial department) in decreasing poverties of Indonesia. In the last point, I define about the failure of globalization especially in global economical and technological progress gives an extra space for Islamic Economic.

Keyword: globalization, Islamic civilization, Islamic thought, Islamic finance, Islamic jurisprudence, Islamic economic.

Introduction to globalization and it’s relation into Islamic civilization.

Globalization refers to “global” means universal. Globalization describes an ongoing process by which regional economies, societies, and cultures have become integrated through a globe-spanning network of communication and exchange. The term is sometimes used to refer specifically to economic globalization: the integration of national economies into the international economy through tradeforeign direct investmentcapital flowsmigration, and the spread of technology. However, globalization is usually recognized as being driven by a combination of economic, technological, sociocultural, political, and biological factors. The term can also refer to the transnational circulation of ideas, languages, or popular culture.[1]

Generally globalization assumed as the results of interconnection of global nations. But, the word globalization does not have an exact meaning yet, I consider that Islamic civilization contributes a huge influence in globalization.  The beginning of globalization is debatable but, there are some mainstreams in term of globalization.

  • First, in the Islamic golden ages in the 7th-15th century. The history said on 9th up to 15th century   artists, engineers, scholars, poets, philosophers, geographers and traders in the Islamic world contributed to the arts, agriculture, economics, industry, law,  literature,  navigation,  philosophy,  science, sociology, and technology, by preserving and building upon earlier traditions and by adding inventions and innovations of their own color.
    • Second, in the rises of Chinese civilization in the 13th century. It was popular phrase “pens vs brushes”. Pens refer to Islamic civilization and brushes refer to Chinas civilization. The Umayyad of al-Andalus were also major intellectual centers with cities such as Cairo and Córdoba rivaling Baghdad,  and another central of science such as Egypt.
    • Third, Andre Gunder Frank, an economist associated with dependency theory. Frank argued that a form of globalization has been in existence since the rise of trade links between Sumer and the Indus Valley Civilization in the third millennium B.C. Critics of this idea point out that it rests upon an overly-broad definition of globalization.
    • Fourth, the early of globalization is in the trade links between the Roman Empire, the Parthian Empire, and the Han Dynasty.
    • Fifth, in the rises of international trading as the result of establishing of the commercial centers of the Middle East and China, greatly facilitated travel along the Silk Road.
    • Sixth, in the rises of colonialism in the 15th century.
    • Seventh, in the rises of multinational company after the rise of maritime European empires, in the 16th and 17th centuries, first the Portuguese and Spanish Empires, and later the Dutch and British Empires.
    • Eighth, in the rises of Britannia economic supremacy and it colonialization in the 19th.
    • Ninth, in the global expansion of US and European Multi National Corporations in the 20th century.

Today, in this 21st century I assume that Islamic civilization starts to influence the globalization. The first step of this process is the Islamization of global economics starting from 3 decades ago and still in the developing today.

The Islamic Economics short preview.

Islam refers to an Arabic word “salima” means save, peace and self surrendering. Islam means humans surrendering into the only one God “Allah”. As explained in the holy qur’an chapter Al-imran verse 19:

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The Religion before Allah is Islam (submission to His Will): nor did the people of the Book dissent there from except through envy of Each other, after knowledge had come to them. but if any deny the Signs of Allah, Allah is swift In calling to account.

Although, many people consider Islam their religion, they have not surrendered completely to Allah; they are not included as the people who are safe under Islam. Islam considers human life in this world is the small part of the entire human life, because there will be eternal life in the hereafter. Therefore the eternal human life in hereafter really related into human life in this world. It is explained in the prophetic tradition (hadist): “Al-dunya mazra’ at-akhirah” which means: the world is the place for human to prepare for the hereafter life. Here are the contributions of Islam as the guidelines of human life in the world. Islam contributes the guidelines of human being to live safely based on Islamic rules and regulation toward human victory in here and hereafter. The consequences are, Islamic thought is not limited in the vertical relation between human and their creator (Allah), but it also involves their relation with another human being or even with another God creations. So Islam is the way of life which guides all aspects of human life.

Islamic thought consists of faith (Aqidah), Islam (Syariah), and Ethic (ihsan). The creed refers to the truth of Islam, syariah refers to the justice/regulations of Islam, and akhlaq refers to the beauty of Islam. Aqidah refers to the principles foundation of Islam that contributes to the strong faith of Allah. Islamic thought is not only the belief of Allah but involves the rules and regulations consisted of several commands and prohibitions of Allah for entire human being in order to relate all human being into their God. It is called syariah or Islamic laws. In Islamic thought, aqidah and syariah have to be completed by akhlak/ihsan (ethic). Akhlak means, human consideration that they worship Allah as well as possible as though, they face Allah directly, even if they do not face Allah directly, their worship is in Allah sight. Therefore, human beings are supported to do Allah commands and avoid his prohibitions correctly.

Ihsan (ethic)
Islamic laws


Faith (aqidah)

Aqidah, syariah, and akhlak are an entity that is related to another. Such as illustrated bellow:

Figure 1.1 the concept of Islam.

The illustration explained aqidah, syariah, and akhlak as a house. Faith (aqidah) is the foundation of human religion to be a better personality. The strong faith causes into a civilized personality. And the religion will not be perfect until human being applies the Islamic laws in their daily life.

Islam and Syariah Banking

After a brief definition about Islam, It can be concluded that Islam is the way of life and regulates all aspects of human life, including the economic aspect. Islamic economics is close with financing and banking. Islamic finance and banking may become the majors’ issues of the world economic development nowadays. After the global economic crisis in 2008, the world is emphasized on looking for another alternative economic system as a replacement for capitalist system. In this modern era Islamic financing and banking is chosen to be one best alternative for economic world. This condition is proved by the vast development of Islamic banking, and many Islamic financial products are applied all over the world.

In fact, to apply Islamic thought in the contemporary economic issues is quiet simple. The first step is identifying the principles and the basic philosophies of Islamic thought in economics, and then identifying the permitted and unpermitted things in the Islamic laws. After these two steps we can widely innovate and create (ijtihad) contemporary economic issues, especially Islamic banking issues.

Before doing something base on Islamic jurisprudence (usul fiqh)/ijtihad in Islamic finance, it is necessary to differentiate the new concept of banking and the concept that already existing concept of Islamic finance. If the banking concept is definitely new for Islamic perspective, it means that ijtihad should be begun from the very fundamental level. Otherwise if the banking concept is already known by Islamic civilization and the functions of bank already applied in the Islamic civilization. The ijtihad process will be simpler.

Complicated (from the lowest level)
Simpler process
New concept

Figure 1.2 the kinds of Ijtihad

Banking in Rasulullah (pbuh) Era.

Globally, a bank has three main functions; those are for saving, lending, and transferring money. In the Islamic economic history, the appropriate financial transaction was become a tradition since the era of Muhammad (pbuh). The transactions such as saving, lending, and transferring money for business or consumptions were generally applied in our prophet Muhammad era.   Therefore, the modern banking functions such as deposits, money lending, and money transferring became the ordinary tradition of Islamic civilization since prophetic era.

Rasulullah is (pbuh), well know as Al-Amin, a trusted man by Mecca citizen. He was trusted by the citizen to save some properties. Therefore, before rasulullah moved to Medina, he instructed Ali bin Abi Thalib r.a. to return all the existing deposits into the owners.[3] In this case, the keeper of the properties was unable to utilize the deposits. In another case Ibnu Abas r.a. ever transferred amounts of money to Kufah and Abdullah bin Zubair r.a. ever transferred amounts of money to his brother Mis’ab bin Zubair r.a. in Iraq. The functions of bank in prophetic era are illustrated bellow.

Money transferring
A people apply a function
Deposits of properties
Function of Bank in Prophetic era
Money saving

Figure 1.3 the functions of bank in prophetic era.

The usage of check was also popular on the development of trading among Syam and Yaman country, at least twice in a year. Indeed, in the period of Umar bin al-khattab r.a. Caliphs use a check to pay any charity for the poor cavils. Check also used for taking any imported wheat from Egypt in baitul Mal.[4] Another case the capital lands based on sharing profits, like mudharabah, muzara’ah, musyaqah, was well known since the early of Muhajirin and Anshar civilization.

It is defiantly proved that banking and other financial products were known or even applied by Islamic civilization in the early of Islam. Moreover, some modern banking term refers to Islamic thought, such as “credit”, “credo” (greek) refers to an Arabic word “qard”. Credit means to lend some money, credo means the trust, and qard according to Islamic law means to lend amounts of money based on trust. Another term is “check”, “cheque” (France) refers to an arabic word “suq”. Suq means a market and check is the exchange tool in market.

Banking in the Caliphs Period. (Abbasid and Umayyad)

Neither probably, the term Bank is unknown in Islamic jurisprudence. The term bank is unknown nor in the era of Muhammad (pbuh), nor the period of caliphs (Abbasid and Umayyad). But, the functions of bank were completely applied based on the Islamic jurisprudence since the early of Islam.

In the era of Muhammad (pbuh), the function of bank applied by single individual and usually an individual was supposed to do no more than one function of bank. This application runs until the Abbasid caliphs. The banking system is developed when a lot of currencies were established in that era, so the expertise to differentiate those money units is extremely needed. This condition happens because each money units has different exchanges values. The people who has such of this expertise called naqid, sarraf, or jihbiz. This activity becomes the origin of money changer.

In case, the term bank is unknown in Islamic jurisprudence but, the “bank” in the early Islam has similar meaning with jihbiz. Jibhiz itself was known since the era of Muawiyah caliphs (661-680 C) as the personal banker. The roles of personal banker (jibhiz) is popular while the Abbasid caliphs under the government of caliph Muqtadir (908-932 C). In his era almost of ministers have their own banker, such as Ibnu Furat was chosen Harun ibnu Imran and Joseph ibnu Wahab as his personal banker. Ibnu Abi Ishak was chosen Ali ibn Isa, Hamid ibnu Wahab chooses Ibrahim ibnu Yuhana, Moreover Abdullah al-Baridi has three bankers.

The development of bank performances at that time was indicated by the usage of check commonly in the market exchange. Moreover the function of banker involved three aspects of banking; receiving deposits, lending money, and transferring money. In this time money could be transferred from a country to other countries without physical removing of money. And most of money chargers built their own office in most of developing countries and began to use check for transferring money and other transactions. In the Islamic banking history, Syaf al-Dawlah al-Hamdani is recorded as the first people who published a check for clearance between Bagdad (irak) and Aleppo (spain). The simple illustration about jibhiz is drawn bellow. [5]

Money saving


Money Transferring

Runs by an institution
Money saving


Money Transferring

Runs by single individual

Figure 1.4 the differences between Jihbiz and Bank.

Banking in the Europe.

In the development of Islamic banking, the single function which was applied by a single individual (jihbiz) was converted into an institutional work as a “bank”. When the European began to establish a bank and ran it by the high interest rates system, it resulted in the complicated problems in the banking system itself. Interest was definitely prohibited in Islamic jurisprudence. This condition widely spread after The King Henry VIII in 1545 permitted an interest in transaction and prohibited in-excessive usury (riba). After his death King Edward VI completely prohibited any interest transactions. And after his death, The Quen Elizabeth I  permitted the interest transactions again.[6]

When the European civilization is developed and the effect of renaissance or  the period in Europe during the 14th, 15th and 16th centuries when people became interested in the ideas and culture of ancient Greece and Rome and used these influences in their own art, and literature.            The European began to explore and colonize almost countries all over the world. Therefore the European was succeed to dominate the global world and also in the global economic. In that period the Islamic civilization was decreasing and decreasing. One by one, the Islamic countries were conquered and colonized by the European. Then, all the Islamic Economic institutions were eliminated and replaced by the western economic institution. This condition is continuing up today. Therefore, almost all banking institutions in the Islamic countries were reminds of European banking institutions which are run by the interest motive.

Islamic Banking in the modern Era.

Interest is definitely prohibited in Islamic jurisprudence and assumed as usury (riba). After the era of colonization and when Muslim countries had their independence, the spirit to establish some non-interest motive financial institutions grew. The first modern effort to find non-interest motive financial institution was found in Malaysia in the middle of 1940, unfortunately that effort was failed.[7] Another modern effort to establish the same institution was found in Pakistan on the end of 1950.

Otherwise, the modern efforts succeed in establishing an Islamic banking was found in the Egypt on 1963 by the founding of Mit Ghamr Local Sacing Bank. This Islamic bank received a warmly acceptance in the Egypt, particularly from amounts of farmers and villagers. This condition lasted only for about 4 years, only since 1963-1967 because of political confusion on that period of years. In 1967 the operational of Mit Ghamr was replaced by National Bank of Egypt and The Central Bank of Egypt. After this replacement, the interest motive banking operation was gradually growth, and really left. In 1917, under the governance of Sadat Nasser Social Bank was established, and the major purposes of this bank were to apply Mit Ghamr financial concept again.

The succeed of Mit Ghamr inspired Muslim civilization all over the world and resulted into the general awareness of Muslim that the Islamic principles spirit in economy is available, acceptable, and suitable to be applied in the modern business. When OKI was already established, many international conferences were held. One of the major purposes of those international conferences was to establish an Islamic bank. Those conferences resulted on International Development Bank (IDB) which was founded in October 1975 with 22 Islamic countries as the founding fathers. IDB was aimed to provide a financial helps for the development of its members, to help all member to establish an Islamic Bank, and have a major roles in economics, banking and financial researches. Today, IDB is centralized in Jeddah-Arab, and has more than 43 countries member.

In the era of 1970’s, the spirit to establish an Islamic financial institution was gradually spread on the world. Some countries such as Pakistan, Iran, and Sudan, change their financial system into Islamic financial system based on Islamic jurisprudence entirely. Therefore, all financial institutions in those countries were operate based on Islamic jurisprudence and refused an interest motive operation. Meanwhile, in other Islamic countries such as Malaysia and Indonesia non-interest banks operate beside others conventional banks.

Nowadays, the development of Islamic banking become so vast and spread on the world entirely, including in the western world. The Islamic Bank International of Denmark recorded as the first Islamic bank operated in Europe, in about 1983 in Denmark.[8] Today, some major banks in the western world such as City Bank, ANZ Bank, Chase Manhattam Bank, and Jerdine Fleming were strive to provide any financial products and services based on the Islamic Jurisprudence.

An individual, even a prophet or caliphs operate a function of bank
An individual begins to operates the three functions of bank in a single work
A financial institution begins to operate the three functions of bank

The picture bellow tries to conclude the development process of Islamic Banking since the era of Muhammad (pbuh) up today.

Figure 1.5 the development process of Islamic Banking.

In the conclusion, the development of financial and banking activities in the Islamic civilization was developed from a single individual operates a function of bank, then it was developed to the profession of jihbiz, finally those functions and activities was adopted by the European civilization in the middle of century by leaving all Islamic jurisprudence and practicing an interest system. Because of, the decline of Muslim civilizations and the western colonization in the Islamic countries, the development and application of Islamic financial system was stopped for some centuries. Just at the end time in 20th century after almost Islamic countries have their own independency, the Islamic financial institution have been developing in many countries and God willing it will be always be developed.

The Development of Islamic Banking in Indonesia.

In Indonesia, Bank Muamalah Indonesia (BMI) is the first Islamic bank that was established in 1992.  Even the development of Islamic banking in Indonesia was rather late; same as in the others Islamic countries the development of Islamic banking in Indonesia is so fast. Recorded in 1992-1998, there is only one Islamic bank in Indonesia. In 2005, the amount of Islamic banking is developed became 20 units consist of 3 conventional units and 17 units of Islamic banking. Meanwhile, the amount of Bank Perkreditan Rakyat Syariah (BPRS) in 2004 was developed up to 88 units.

Based data of Bank Indonesia, the prospect of Islamic banking in 2005 was estimated to become quite good. Islamic banking industries predicted were always highly developed. In November 2004, the values of Islamic banking institutions reached 14.0 billion rupiahs with 88.6% of the development levels and reached 1.1% of national banking values. In the end of 2005 the values of Islamic banking institutions reached about 20 billion rupiahs and reached 1.8% of national banking values.[9] These Islamic banking developments must be supported with the good human’s resources development in quality and quantity. Unfortunately, many Islamic banking in Indonesia use inexpert employees, academically and practically. Therefore, this condition quite influences the productivity and professionally of almost Islamic banking in Indonesia. This may become our consideration to maximize the humans’ resources especially for Islamic financial institutions; In order to create a conducive environmental system for Islamic finance.

Finally, after our short consideration in the history of Islamic banking, it can be conclude, even thought the Islamic jurisprudence did not know the terms of “bank”, but the history proved that the functions of banking was already known by Islamic civilization and even absolutely become a common tradition since the era of Muhammad (pbuh) and was developed and decreased as well as the developing or decreasing of Islamic civilization on the certain place and time.

Identification of Prohibited Transaction in the Common Economy.

There are two general Islamic laws (the origins of law) in the Islamic jurisprudence; First, regulate worshiping (ibadah) laws and second, regulate social relations (muamalah) laws. In term of worshiping, all worship is prohibited except, there is any instructions based on al-Qur’an and prophetic traditions (hadist). In term of social relations laws (muamalah) everything is permitted except, there is any proposition that prohibits it. These laws mean that any kinds of economic transactions are permitted except, there are implications of prohibited factors on it. In general, there are three factors caused into prohibited transaction:

1. Prohibited because of the thing itself (haram li-dzatihi).

This transaction is prohibited because the object of the transaction itself for instance, drugs, beer, or inappropriate meals (pig or dog) etc. This transactions is prohibited even the deal is based on Islamic jurisprudence.

2. Prohibited because of others factors (haram li-gairihi).

This transaction is prohibited not because its transaction objects but because of others factors, such as:

a. Violate the one principle of Islamic jurisprudence: “An Taradin Minkum”, indicated by any tadlis (fraud). In the Islamic jurisprudence every transaction is based on an equal willing between the two parties. Each party has complete and equal information. An asymmetric information or unequal information causes into any fraud (tadlis). Fraud in quality, quantity, price, and deliveries.

b. Violate the one principle of Islamic jurisprudence: “La Tazhlimu wal La Tuzlamun”, don’t hurt each others, for instance, tagrir (gharar) uncertain to both parties, market engineering on supplies (ikhtikar) and demands (Bai’ Najasy), Usury (riba), gambling (maysir), and Corruptions (risywah).

3. Inappropriate contract (akad).

The transactions that not categorized in haram li-dzatihi and haram li-gairihi transactions must be in appropriate contract (akad), in order to be an acceptable transaction based on Islamic jurisprudence. A contrac will be inappropriate if one or more these factors occurred:

1. Incomplete principles and requirement involved the parties, object (stuffs), and the agreement. 2. Ta’alluq is happens if a transaction results to another one transaction in required Bai’ al-Inah.

3. Two in one is happened if a transaction has double akad (contract), therefore caused into gharar (shafqatain fi al-shafqah).

The brief illustration explains that there are many inappropriate values that may be happen in the conventional economy. After an understanding of some factors that caused into prohibited transactions, hopefully, we are able to determine the prohibited and permitted transaction based on Islamic jurisprudence.

How BMT decreases the poverty in Indonesia.

Baitul Maal wat Tanwil (BMT) is a micro economical Islamic financial department operates by profit sharing system. BMT helps small business scale in order to decrease poverties by managing the collective capital from the investors. Principally, BMT was built based on salaam civilization the fair and peaceful social welfare.

The basic principles of BMT:

  • Ahsan (the best quality control), Thayyiban (the most suitable), Ahsanu ‘amala (the investors and the costumers satisfaction).
  • Barokah (fully interested and effective efficient), Transparency and responsibility for civil society.
  • Spiritual communication.
  • Democratized, participated, and inclusive.
  • Social welfare
  • Potential developing of local civic society.

BMT is a collective independent department purposed to develop social welfare by financing civil economic and decrease amount of poverty. The implementations of BMT principles become the most important factor to develop BMT itself.

Based on Indonesian statistic on 2009 the collective amount of poor civilization is 33.7 million of entire civilization, in the 4.5% of national economic development and 9% of inflation. [10]As BMT has become the most strategic department to reduce the poverty, it is proved that in 1995-2005, more than 3.300 BMTs were established and the assets reached more than 1.7 billion rupiah, served more than 2 million consumers, provided 1.5 million microeconomic credits, and employed more than 21.000 employees. Here is the list of developed BMTs in Indonesia:

  • BMT Dinar (karang anyar with 31 billion rupiah assets)
  • BMT Ben Taqwa (central of java with 30 billion rupiah assets)
  • BMT MMU (pasuruhan east java with 17 billion rupiah assets)
  • BMT Marhamah (wonosobo central of java with 13 billion rupiah assets)
  • BMT Tumang (boyolali central of java with 4 billion rupiah assets)
  • BMT Baitul Rahman (bontang east borneo with 6 billion assets)
  • BMT PSU (malang east java with 5,6 billion assets)[11]

BMT succeed to decreas the amount of poverty by applying social actions (baitul mal) such as zakah, shadaqoh, waqaf and another charities. This action has a direct impact to the poor society.  Starting with zakah, shadaqah, waqaf, BMT runs its function as the agent of assets distribution and as social economic healer. Social credit or (qardhul hasan) from social money is allocated only for the poorest social civils, because this social function is non profit oriented. It also creates a harmoniuos relationship among the rich and the poor ones.

BMT is also profit oriented, as the common Islamic bank, BMT also provides: mudharabah, musyarakah, ijarah, etc. This function includes financials and real sector function. Finally, these two functions support BMT to be the most effective and efficient department to decrease any poverty not only in indonesia but also the entire world. BMT is established as the agent of community development and the agent of asset distribution. BMT grows as an institution to increase social welfare, create a social econoic justice, create new job vacations, and create bussines network.

The failure of globalization gives an extra space for Islamic Economy.

Globalization ideas especially in capitalism may contribute high level of welfare but, it is only for the capitalist not for others. Capitalist system provides unequal economic welfare. The accumulation of this unequal economic welfare system exploded at that time. In 2008 an economic crisis stemming from the US financial market rapidly evolves into global economies, and influences the real sectors in many countries. Economic and financial bubble is accused to be the cause of the crisis. The crisis also spreads to developing countries such as China, Brazil, India, and Indonesia as well. However, the main sources of the crisis stems from the greed and acquisitive behavior of capitalism that allows a number of Islam-prohibited interest (riba), gambling (maysir) and unrealistic speculative behavior (gharar) takes place in the economy. Those elements create a financial bubble for accumulative purposes of the capital. Without ethical intervene, the crisis seems to continuously happen. It is time for Islamic economics that relies much on the ethical values to play more important roles, in order to establish an economic system based on the Islamic teaching.

The Prophet (pbuh) had laid down the foundation of economic teaching in Islam, for instance by establishing market, where prices are set by God, with little intervene from the government. In the market, people are encouraged to get involved in jobs and generate earnings.

Market provides two substantial notions in Islamic economic. First, mechanism behind the market is governed by an ‘Invisible Hand’, which in such a case much differs from Adam Smith’s unclear ‘invisible hand’. Smith fails to define who really the invisible hand as he conceptualizes is. On the other hand, Islamic concept of market clearly defines the Invisible Hand as God, Allah the Almighty, as clarified by the Prophet himself, when he got a request from the companions to take control following the case of price escalation. However, the Prophet is reported to have refused the proposal, by allowing God to run the mechanism behind human activities in the market. The concept that God’s Hand is in operation behind the market mechanism (yadullaha fawqa aidihim or the Hand of Allah is over their hands) seems to be adopted by Adam Smith using “unclear” invisible hand.

Second, the concept of market also provides a great place for a mechanics of generating gains or profits, which can be shared among the contributors and market participants. On the other hand, Islamic market does not allow for any riba (forbidden gains such as interest), gharar (speculative), maysir (gambling), and zhulm (exploitative) transactions to take place. These four elements forbidden in Islam have become the core components in the development of capitalism since its inception. As far as current financial crisis is concerned, the second notion set up in the Islamic concept of market comprising the four elements is given emphasis in this paper. However, these elements are not of the interest of capitalism to adopt, as elaborated further in the following sections. This is because the spirit of seeking the material greed exhibited clearly in Smith’s notion of self-interest remains anchored in capitalism.

Global financial crisis may be not happened if, the capitalist concerns about Islamic values and avoid the four prohibited elements of Islamic economic (riba, gharar, maisir, and zhulm) . However, capitalism is not Islamic system. The failure of capitalist economic system provides more space for Islamic economy. Actually, the development of Islamic economy already began since four decades before on 1970-1980 eras. The climax of the development process realized after global economic crisis.

The capitalism may be failed but the globalization is on-going, capitalism only a small part of globalization. We consider that globalization is not only sudden event but, it was a long historical process. Globalization may give a bad impact but, globalization simplifies the interconnection among countries. The World Wide Web, internet, international flight, international export and import, international student exchange any many globalization product supported human mobility. I insist that globalization is only a human made; the impact of it just refers to the user.

This condition pushes international consideration to have an international conference. The first international Islamic conference was held in 1976 on Mecca. The result of that conference claimed as the birth of Islamic Economy. Since that first international conference many developments of Islamic economy happen. This process continued as the globalization runs, the other five international Islamic Economy conferences was held on Islamabad (1983), Kuala Lumpur (1993), Loughborough (2000), Bahrain (2004) and Jakarta (2005) involved a hundreds national conference, seminar, workshop, and symposium on the world. These kinds of compulsories must be concerning about the essential issues of economic.

Then there is no hesitation that, Islamic economy including Islamic finance and banking has a significant development since 30 years ago. But these development processes comes with many critics especially in the implementation of Islamic banking and finance. The early writing about Islamic economy on 1970-1980 was defined exactly about the importance of understanding Islamic worldviews and concepts to support Islamic economy. Other writing also defines that to develop the Islamic economy also refers to the modern economic today.

In short term Islamic economy is the elaborating result from the modern economic system which already contaminated by the western thought. There is a general statement in the western countries (US and Europe) of the development of science and technologies. So the development of capitalism as the product of secular economics and globalization really separates between science and God revelation. In the contrary of that condition Islamic economics tries to integrate among science and God revelation. In the Islamic perspective science and God revelation is an integrated entity. But, Islam doesn’t refuse the western science entirely. “No science has ever been integrated into any civilization without some of it also being rejected. It’s like the body. If we only ate and the body did not reject anything we would die in a few days. Some of the food has to be absorbed; some of the food has to be rejected.”  Or we can say that Islamic economic system is the result of modern economic evaluated by the critical Islamic concept and the assimilation of modern economic if necessary.

The effort and struggle of Islam to influence the world was starting now, day by day, the amount of Islamic citizen in the western county is increasing and increasing, and the secular western paradigm is gradually decreasing. Because of the international information exchange around the world really spreads the truly Islamic value all over the world. Eventually the world will accept the Islamic thought gradually starts for the economics. Islamic economics and finance was expensing world unfair economics system which already results a global financial crisis lately. Otherwise the understanding, evaluating, and the implementation of it are extremely needed.

Finally, I consider that ”globalization” is only a human made system. It refers to the animal of globalization. Globalization may contribute a terrible impact especially for moral and Islamic velues. It comes because of many contradict values in globalization with Islamic shari’a. But Islamic world have to realize and start utilize it as the human made tool to spearding the islamic thought.  “No science has ever been integrated into any civilization without some of it also being rejected. It’s like the body. If we only ate and the body did not reject anything we would die in a few days. Some of the food has to be absorbed; some of the food has to be rejected.” (Syyed Hossein Nasr). S.H. Nasr statement supposed to explain that in everything there is an overlapping culture between western and Islamic civilization. It means that not all what comes from west is bad/definitely wrong, but Islamic world cannot adopt it entirely. There must be elaboration of globalization that definitely separated itself with the God revelations. The wrong ideas of globalization have to be avoided and the right globalization ideas have to be utilized for Islamic development. Surely,   this elaboration comes with intellectual criticism, and Islamic jurisprudence approach.


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Adiwarman A. Karim, op.cip., page 72

Department of Islamic Banking, Bank of Indonesia., The development report of Islamic Banking 2004, (Jakarta: Bank of Indonesia 2004), page 65.

Erik Trolle-Schultz., “How the First Islamic Banking was Established in Europe,” in Butterworths Editorial Staff, Islamic Banking and Finance, (London: 1989) page. 43-52.

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Sudin Haron, Islamic Banking: Rules and Regulations, (Petaling Jaya: Pelanduk Publication,. 1997), page 2. Samii Hassan Homoud, Progess of Islamic Banking, Islamic Economic Studies, vol.2. No. 1 December, 1994, page 71-80.

Sudin Harot, op.cit., page, 3.

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Q.S. Ali-Imran (3):19


[2] Q.S. Ali-Imran (3):19

[3] Sami Hamoud, Islamic Banking, London: Arabian information ltd., 1985.

[4] Kadim Sadr, Money and Monetary Policies in Early islam, in Abbas Mirakhor and Baqir Al-Hasani, Essay on Iqtisad: An Islamic Approach to Economic Problems, (Silver Spring: Nur Corp., 1989), page 202

[5] Sudin Haron, Islamic Banking: Rules and Regulations, (Petaling Jaya: Pelanduk Publication,. 1997), page 2. Samii Hassan Homoud, Progess of Islamic Banking, Islamic Economic Studies, vol.2. No. 1 December, 1994, page 71-80.

[6] Adiwarman A. Karim, op.cip., page 72

[7] Sudin Harot, op.cit., page, 3.

[8] Erik Trolle-Schultz, “How the First Islamic Banking was Established in Europe,” in Butterworths Editorial Staff, Islamic Banking and Finance, (London: 1989) page. 43-52.

[9] Department of Islamic Banking, Bank of Indonesia, The development report of Islamic Banking 2004, (Jakarta: Bank of Indonesia 2004), page 65.