Islamic Financial Institutions Course

1. Islamic Financial Institutions Course International Program on Islamic Economic and Finance Term II/2010 Lecturer: Sartini, S.E., M.Sc.Acc., Ak

2. First Week Discussion • Learning Contract • Introduction to Islamic Financial Institution • Discussion

3. Learning Contract • About the Lecturer • Overview of the Subject • Learning Objectives • Learning Methods • Assessment • References

4. About the Lecturer • Name: Sartini, S.E., M.Sc.Acc., Ak • Website: www.sartini.wordpress.com • Phone: 0274-783 6898 • Email: tinnie_8@yahoo.com • Address: Griya Suryo Asri II No. A4 RW:9 Suryodiningratan MJ II Yogyakarta • Consultation Hours: By appointment only

5. Overview of the Subject • This subject focuses on the discussion of Islamic Financial Institutions, one of some subgroups of Islamic Financial System. The IFIs included in this discussions are IFIs banks such as Islamic commercial bank and BPRS; as well as IFIs non-banks such as Islamic leasing, Islamic insurance, BMT, Rahn, Islamic Capital Market and Islamic Fund Manager. • Although IFIs will be the main topic to be discussed in this subject, it will also discuss topics related to the other Islamic Financial System subgroups, including: • Islamic Financial Instruments • Islamic Financial Rules and Regulations • Islamic Financial Control and Supervision • Another related topic that will also be discussed is topic on Islamic Public Institutions such as Zakat institution and Wakaf Institution

6. Learning Objectives • This subject aims to provide student, an understanding of : • The important of Islamic financial system, • The Islamic Financial Instruments, • The operation of Islamic Financial Institutions, • The Islamic financial rules and regulations, • The mechanisms of Islamic financial controls and supervisions • Islamic Public Institutions

7. Learning Methods • Tutorial • Presentation and Discussion

8. Assessment (1)

9. Assessment (2) • Essay • Students are required to submit a 2000-2500 word essay about Islamic financial institutions. The precise topic will be announced in week 4, and the paper must be submitted in week 8. The essay must be written individually. • Assignment • Students are required to make a presentation material related to the topic discussed every week. • Presentation & Discussion • Students must present their assignments. One student will present one topic. The schedule will be arranged together at the first meeting. • Students, who are not presenting their assignments, must participate as discussants.

10. Grading System • How about the university policy? • What’s about this? • A : 85-100 • B : 65-84 • C : 45-64 • D : 25-44 • E < 24

11. Assessment policy • Essays and assignments will not be accepted after the due date unless arrangements for an extension of time have been made prior to the due date. • If you do not agree with the result that you achieve for any piece of assessment for this subject please contact the lecturer immediately. • You have a right to know the reasons why your work has received a certain grade and to request it be reassessed if you believe it has been unfairly assessed.

12. Subject Organization: Before Mid term Exam

13. Subject Organization: After Mid term Exam

14. Introduction The Need for This Subject

15. Background and Rationales • Since the mid 20th century, there has been a serious effort within Muslim societies to comply fully to the Islamic tenets in daily life. • This includes the application of Islamic economic teachings, as discussed in various verses of the holy Qur’an, in the ahadith, as well as exemplified in the real life of prophet Muhammad and his companions. • The real example of this effort can be seen in the establishment of Islamic financial institutions such as banks, insurance companies, capital markets, mutual funds and so forth, both in Muslim and non-Muslim countries.

16. Background & Rationales • The proliferation of growth in the Islamic banking sector, both nationally and internationally, has been remarkable. Islamic banks now stand side by side with their conventional counterparts in more than 150 countries worldwide. • Islamic Banking and Finance has become an important academic discipline and has attracted research in a number related areas such as the economics, finance, accounting, law, Syari’ah and others. • Demand for Islamic Banking and financial instruments as well as Islamic financial institutions have experienced a rapid growth internationally. • As an important financial activity in the Muslim world, knowledge and expertise in this discipline is very valuable, not only to the Islamic banks and financial institutions, but also to the Muslim world in ensuring sufficient number of experts and knowledgeable workers in this area

17. Scenario • Patricia Aburdene (2007) in Megatrend 2010 • The Power of Spiritualism • Spirituality in Business • One of The Indonesian National Agendas • President SBY Speech • Opening of Shariah Economic Festival http://www.indonesia.go.id/id/index2.php?option=com_content&do_pdf=1&id=6624 • Budget BI for Economic Shariah Development (8 x Rp 1,3)Direktorat Perbankan Syariah BI (Dr. Mulya Siregar)

18. Overview of Islamic Economic

19. Why Islamic Economic? Islam as a comprehensive way of life AQIDAH SYARIAH AKHLAK MUAMALAH IBADAH SPECIAL RIGHT PUBLIC RIGHT INTERIOR AFFAIRS EXTERIORS AFFAIRS ECONOMY CONSTITUENCY ADMINISTRATIVE FINANCE Zarqa (1959)

20. Classic Islamic Economist • Abu Yusuf (731-798), • Yahya Ibn Adham(818), • El-Hariri (1054-1122), • Tusi (1201-1274), • Ibnu Taymiyah (1262-1328), • Ibnu Khaldun (1332-1406), • Shah Waliullah (1702-1763).

21. Contemporary Interest in Islamic Economics Political Independence of Moslems Countries Need to find Indigenous solutions to socio economic problems Rejection of western capitalism and socialism End of II World War Islamic Resurgence Desire to be free of colonial influence Answer in Islamic Heritage

22. Development of Islamic Economics (1) • 1930’s – 40’s Fiqh and Kalam • 1950’s – early 60’s economics teachings and principles of Islam • 1970’s – 80’s calls for Islamic Economics and Islamic Economic System

23. Development of Islamic Economics (2) • Writing on Islamic Economics • Jurists  legalistic  confined to riba, zakat, banking, etc. • Modernist  liberal interpretation of sources of Islam  answer problems of today • Western trained Muslim Economiists  combined fiqh and economics  economic system and analysis

24. Development of Islamic Economics (3) • Contemporary Muslim Economic Thingking • Agreement on philosophical foundation • Agreement on sources of knowledge • Agreement on general principles Common “core” based on Qur’an and Sunnah

25. Development of Islamic Economics (4) • Differences arise in • Interpretation of term and concept found in Qur’an and Sunnah • Approach and methodology followed in building theoritical construct of Islamic Economics and Islamic Economics Systems • Interpretation of features in Islamic Economics System Shades of Muslim economics thought

26. Development of Islamic Economics (5) • Need for comparative analysis of contemporary Moslem Economics thought • Areas chosen  approach and scope, underlying assumptions, Features of an Islamic Economy, Distribution, Production • Scholar chosen (based on the literature written)  M.A. Mannan, M.N. Siddiqi, S.N.H. Naqvi, M.Kahf, S.M. Taleghani, M. Baqir Al Sadr For Further Discussion please refer to “Contemporary Islamic Economic Thought” written by M. Aslam Haneef

27. Outline of Islamic Economics System

28. Special Features of Islamic Economic System • Inspired by Islamic worldview (tasawwur Islami) • The concept of wealth and ownership (vicegerency/khalifah) • The implementation of the objective of Islamic Law/Syariah (maqasid asy syariah) • The prohibition of riba, gharar • Institutionalization of public service institutions such as zakat, infak, sodaqoh and wakaf

29. Special Features of Islamic Economic System • Institutionalization of Islamic Fiancial Institutions • Introduction to fair competition and dan equitable market to achieve the efficiency and justice in economic transactions • Economic regulation trough al hisbah • Equitable distribution of wealth to achieve social justice (tazkiyah)

30. Foundations of Islamic InstitutionsandIslamic Financial System

31. Islamic Institutions

32. “Tidak ada keuntungan bagi orang-orang yang menyalahgunakan kekuasaannya, dan mereka tidak akan pernah memiliki pemimpin jika dipimpin oleh orang yang tidak baik”(Al Afwah Al Awdi Pre-Islamic poet, as quoted by Al Mawardi Al Ahkam Al Sultaniyah)

33. Islamic System and Institutions • Didirikan dalam Tasawwur Islam • Dikelola berdasar moral dan etika Islam • Diatur oleh syariah Islam

34. Maslahah • Prinsip-prinsip untuk mencapai terpenuhinya kepentingan umum. • Good is lawful, and lawful must be good. • Tujuannya adalah untuk melindungi kepentingan yaitu (Imam Syatibi): • Daruriyat (kebutuhan dasar) • Hajiyyat (kebutuhan tambahan) • Tahsiniyyat (kebutuhan pelengkap)

35. Daruriyat • Melindungi: • Deen (agama) • Nafs (jiwa) • Nasl (keturunan/keluarga) • Mal (harta) • ‘Aql (akal)

36. Hajiyyat • Tambahan terhadap kebutuhan pokok • Jika diabaikan mungkin menimbulkan kekurangan/masalah. • Contoh: pelarangan penjualan alkohol untuk menghindari konsumsi alkohol. • Contoh: kemudahan dalam menjalankan ibadah bagi orang sakit ataupun musafir.

37. Tahsiniyyat • Pemenuhan kebutuhan ini memberikan peningkatan kualitas hidup. • More desirable. • Contoh: menghindari pemborosan.

38. Islamic Accountability • Tanggungjawab transedental terhadap Allah SWT (hablunmminnalah) • Tanggung jawab sosial (hablumminanass) • Setiap manusia adalah khalifah • Kebahagiaan dunia dan akhirat • Tujuan ekonomi tidak hanya menyangkut keakayaan bersih tetapi juga meliputi pembersihan diri dan kekayaan (tazkiyah)