√ Definition of Islamic Banks, History, Functions, Purpose, Characteristics, Types and Products

Definition of Islamic Banks, History, Functions, Purpose, Characteristics, Types and Products – In this discussion, we will explain about Islamic Banks. Which includes the meaning, history, functions, characteristics, types and products of Islamic banks which will be explained in full and easy to understand.

Definition of Islamic Banks, History, Functions, Purpose, Characteristics, Types and Products

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Definition of Islamic Banks

Islamic banks are banks whose operations are guided by the business that was carried out as in the time of the Prophet Muhammad. Forms of business that existed before but were not prohibited by the Prophet or new forms of business as a result of the ijtihad of religious leaders who did not deviate from the Al-Qur'an and Al-Hadith.

Definition of Islamic Banks According to Experts

The following is the definition of Islamic banking according to experts.

1. Drs. H. Karnaen Perwata Atmadja

   The definition of Islamic banks according to Drs. H. Karnaen Perwata Atmadja is a bank that operates according to Islamic sharia principles whose operational procedures refer to the provisions of the Al-Qur'an and Al-Hadith.

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2. Islamic Encyclopedia

   The definition of an Islamic bank according to the Encyclopedia of Islam is a financial institution whose main business is to provide credit and services in payment traffic and money circulation whose operations are adjusted to the principles Islamic sharia.

3. UU no. 10 of 1998

   Definition of Islamic banks according to Law no. 10 of 1998 is a bank that carries out activities based on sharia principles and by type consists of sharia commercial banks and people's financing banks sharia.

4. M. Syafe'i Antonio and Perwata Atmadja

   The definition of Islamic banks according to M. Syafe'i Antonio and Perwata Atmadja are banks that operate based on Islamic sharia principles and their procedures refer to the provisions of the Qur'an and Hadith.

5. Sudarsono

   The definition of Islamic banks according to Sudarsono is a financial institution that provides credit and services others in payment traffic and money circulation that operate on the principles sharia.

6. Siamese Dahlan

   The definition of an Islamic bank according to Siamat Dahlan is a bank that runs its business based on sharia principles by referring to the Al-Qur'an and Al-Hadith

7. Schaik

   The definition of Islamic banking according to Schaik is a form of modern banking based on Islamic law, developed in the Middle Ages of Islam, uses the concept of risk sharing as the main method and eliminates the financial system based on certainty and predetermined finances previously.

8. Law No. 21 of 2008 concerning Islamic Banking

   The definition of an Islamic bank according to Law No. 21 of 2008 is a bank that carries out its business activities based on sharia principles and according to type consisting of Islamic Commercial Banks and People's Financing Banks Sharia.

9. Muhammad (2005:13)

   The definition of an Islamic bank according to Muhammad is a financial institution whose main business is providing financing and services other transactions in payment traffic and money circulation whose operations are adjusted to sharia principles Islam

History of Islamic Banks

During the Prophet's lifetime, in general, banks were institutions that performed three main functions: receiving money deposits, lending money and providing money transfer services. In the history of the Muslim economy, financing carried out with sharia-compliant contracts has become part of the habits of Muslims since the time of the Prophet Muhammad. These activities include receiving safekeeping of assets, lending money for consumption purposes and as well as business interests, in addition to that also carry out remittances that have been commonly carried out since ancient times Messenger of Allah

The idea of ​​establishing an Islamic Bank or Islamic Bank at the international level is in the conference Islamic countries of the world in Kuala Lumpur, Malaysia on 21-27 April 1969 which was approved by 19 countries including From Indonesia. The conference made several decisions, including:

• Every profit must be subject to the law of profit and loss, if not, then including usury and usury, a little or a lot, is unlawful.
• There is a suggestion that Islamic banks should be cleared of the usury system in a short period of time.
• While waiting for the establishment of Islamic banks, banks that practice interest are allowed to operate but only if they are in a state of emergency.

Because based on fiqh law, bank interest is included in the category of usury, which means unlawful in a number of countries Muslims and those who have a majority Muslim population are starting to move to establish alternative non-bank institutions usury.

The first modern attempt to set up the first interest-free bank, first undertaken in Malaysia in the mid-1940s, was research another implemented in Pakistan in the late 1950s where interest-free credit institutions were set up in state villages the. However, the establishment of the most successful and innovative Islamic bank in modern times was carried out in Egypt in 1963 with the founding of Mitt Ghamr Local Saving Bank.

In Indonesia, the first Islamic bank appeared in 1991 and began operating officially in 1992. Meanwhile, thinking about it has existed since the 1970s. According to Dawam Raharjo, when giving the foreword to the book Islamic Bank Fiqh and Financial Analysis, the obstacle was is a political factor namely that the establishment of an Islamic bank is considered as part of the ideals of establishing a State Islam.

But since the 2000s, which has been proof of the superiority of Islamic banks (Islamic banks) over conventional banks, namely, Bank Muamalat does not require any injection of funds, when conventional banks screamed for hundreds of trillions of Bank Indonesia Liquidity Assistance due to the negative spreads of Islamic banks also appeared in Indonesia

Functions of Islamic Banks

The following are the functions of the existence of Islamic banks:

• Fundraising

  Similar to conventional banks, Islamic banks have a function to collect funds from the public, the difference between the two is if the bank conventionally, savers will get remuneration in the form of interest, whereas in Islamic banks, savers will get remuneration in the form of interest profit sharing.

• Funding Provider

  Funds that have been collected or collected by Islamic banks from customers will then be channeled back to other customers with a profit sharing system.

• Providing Bank Services

  In this capacity, Islamic banks have the function of providing services such as transfer services, book transfers, cash withdrawal services as well as other banking services.

Purpose of Islamic Banks

In Islamic banking, the objectives are as follows:
Based on the Handbook of Islamic Banking, the purpose of Islamic banking is to provide facilities finance by seeking financial instruments commensurate with the provisions and norms sharia. It is very different from conventional banks, Islamic banks do not have the goal of maximizing their profits as is the case with Islamic banks banking system which is based on interest, but the goal of Islamic banking is to provide socio-economic benefits to people Muslim.

Characteristics of Islamic Banks

The following are some of the characteristics of Islamic banks, namely:

• Costs that have been agreed when the contract agreement is issued in the form of a nominal amount that is flexible and can be negotiated within reasonable limits.
• Using percentages in terms of the obligation to make payments is always avoided.
• In a project financing contract, the bank does not provide a calculation based on a face-to-face defined profit.
• Referrals of funds originating from the public in the form of deposits or savings are considered by the depositor as a deposit, while for the bank it is considered as a deposit. which is mandated as a statement and in a bank-financed project in accordance with sharia principles so that depositors are not promised real rewards.
• There is a sharia board that has the task of supervising the bank from a sharia perspective.
• Islamic banks often use Arabic terms which are already listed in Islamic jurisprudence.
• There is a special product, namely pure social financing where the customer is not required to return the financing (al-qordul hasal)
• There is a prohibition on certain business activities of Islamic banks
• There are many types of Islamic bank business activities when compared to conventional banks
• In Islamic banking, the relationship between the bank and the customer is a contractual relationship (contract) between the investors who own the funds (shohibul maal) with investors managing funds (mudharib) who both work productively and share profits fairly.

Types of Islamic Banks

According to its working principle, Islamic banks are divided into three types, namely Islamic Commercial Banks (BUS), Shariah Business Units (UUS) and Islamic People's Financing Banks (BPRS), which are explained below.

• Sharia Commercial Banks
  Islamic commercial banks are Islamic banks which in their business activities provide payment traffic services. Like PT. Bank Muamalat Indonesia, PT. Bank BRI Syariah, PT. Mandiri Syariah Bank, PT. Bank BNI Syariah and others.
• Sharia Business Unit
  Sharia business units are work units from the head office of Conventional Commercial Banks which have the function of the main office, and branch office units that carry out business activities according to sharia principles. Like. PT. State Savings Bank (BTN), PT. Bank Danamon Indonesia, PT. Bank CIMB Niaga, and others.
• Sharia People's Financing Bank
  Islamic people's financing banks are banks that in their activities do not collect public funds in the form of demand deposits, so they cannot issue checks and demand deposits. Like PT. BPRS Amanah Rabbaniah, PT. BPRS Buana Mitra Perwira, and others.

Until now there are around 11 Islamic Commercial Banks, 23 Islamic Business Units, and also 163 Islamic People's Financing Banks.

Sharia Bank Products

The following are products from Islamic banks which are divided into three products. The first is the distribution of funds, the second is fundraising products, and the last is the service products provided by the bank to its customers. Below is a description of these products

Fund Distribution Products

Principles of Buying and Selling (Ba'i)
The sale and purchase contract is carried out because there is a transfer of ownership of the goods. The bank's profit is spelled out up front, as well as the selling price. There are three types of buying and selling in working capital financing and investment in Islamic banks, among others

• Ba'i Al Murabahah is buying and selling at a base price plus profit agreed upon between the bank and the customer, in this way the parties the bank explains the price of the goods to the customer, which in the future the bank will provide profit sharing in a certain amount according to what it becomes agreement.
• Ba'i Assalam is in buying and selling the customer as the buyer and the customer gives the money at the place of the contract based on the price of the goods ordered and the nature of the goods that have been explained previously. The money submitted becomes the bank's responsibility as the recipient of the order and payment is made quickly or immediately.
• Ba'i Al Istishna is part of Ba'i Assalam but ba'i al ishtishna is often used in manufacturing. All provisions of Ba'i Ishtishna follow the provisions of Ba'i Assalam but payments can be made several times.

Lease Principle (Ijarah)
Ijarah is an agreement to transfer usufructuary rights over goods or services by means of a lease without being followed by a transfer of ownership of the goods being rented. In it, the bank leases equipment to customers by way of a fee that has been agreed in advance or has been agreed upon in advance.

• Profit Sharing Principle (Syirkah)
  There are two types of products in the principle of profit sharing or syirkah, namely:
  • Musyarakah
    Is one of the sharia products in which there are two or more parties working together to increase assets that are jointly owned. Where all parties combine the resources they already have either in the form of tangible or physical or intangible forms. Among this, all parties who work together contribute what they have in the form of funds, goods, capabilities, or other assets. The provisions in musyarakah are that the owner of capital has the right to determine the business policy that is driven by the project implementer.
  • Mudharabah
    Is a collaboration between 2 or more people in which the owner of the capital trusts the capital to the manager with a profit sharing agreement. The basic difference between musyarakah and mudharabah is the contribution to management and finance community is given and owned by two or more people, whereas in mudharabah capital is owned by only one party.

Fundraising Products

Fundraising products in Islamic banks include demand deposits, savings and time deposits. The principles applied in Islamic banks are:

• Wadiah principle
  The application of the wadiah principle that is carried out is wadiah yad dhamanah which is applied to current account product accounts. In contrast to wadiah amanah, in which the entrusted party is responsible for the integrity of the entrusted property so that he may utilize the entrusted property. And in wadiah trust, the entrusted property cannot be utilized by the entrusted person.
• Mudharabah Principle
  In the mudharabah principle, the depositor or depositor of funds acts as the owner of capital while the bank acts as a manager. Funds kept by the bank are used to carry out financing, in this case if the bank use it for mudharabah financing, the bank has the responsibility for possible losses happen.
  Based on the authority obtained by the depositor, the mudharabah principle is divided into three parts, namely:
  • Mudharabah Mutlaqah
    It is a principle that can be in the form of savings and deposits, so there are two types, namely mudharabah savings and mudharabah deposits. There are no restrictions from the bank to use the funds that have been collected.
  • Mudharabah Muqayyadah On Balance Sheet
    Is a special type of deposit and the owner can make special conditions that must be complied with by the bank. For example, it is required for certain businesses, or for certain contracts.
  • Muqayyadah Muqayyadah Muqayyadah Off Balance Sheet
    Is the channeling of funds directly to business operators and banks as intermediaries between owners of funds and business operators. Business implementers can also submit certain conditions that must be complied with by banks in determining the type of business and implementing the business.

Banking Service Products

In addition to being able to carry out fundraising activities and channeling funds, banks can also provide services to customers in exchange for rent or profits, these services are:

• Sharft (Foreign Exchange Sale and Purchase)
  Is the activity of buying and selling foreign currencies that are not the same but must be carried out at the same time (spot). The bank earns a profit for this buying and selling service.
• Ijarah (Rent)
  Is the activity of renting out safe deposit boxes and document administration services (custodians), in this activity the bank earns rental profits from these services.

Thus has been explained about Definition of Islamic Banks, History, Functions, Purpose, Characteristics, Types and Products, hopefully can add to your insight and knowledge. Thank you for visiting and don't forget to read our other articles.