IN SYIRKAH (MUSYARAKAH AND MUDHARABAH) FINANCING
The image of Islamic Banking system is increasing since the financial crisis in 2008. Islamic financial market activity as well as in some developed countries such as Australia, Bahamas, Canada, Cayman Islands, Danish, Guernsey, jersey, Ireland, Luxembourgh, Switzerland, United Kingdom, United States, and Virgin Islands also grow (Latifa and Mervyn 2001, p.9). Base on Bank Indonesia report at the third quarter 2009, The Banker’s survey in 2009 showed that the asset managed by the 500 largest Islamic financial institutions in the world in 2009 grew 28.6% compared to 2008 or from USD639 billion to USD822 billion.
In Indonesia, Islamic Banking was began in 1992 with the establishment of Bank Muamalat Indonesia and followed by Bank Syariah Mandiri in 1999. Bank Indonesia statistic informed that position in March 2010 there were eight Islamic Commercial Bank, 25 Business Unit, and 143 Islamic Rural Bank (BPRS). Total number of Islamic Banking offices are 1499 units. Looking at the trend growth of Islamic banking institutions and the number of such offices, it seems that the market of Islamic Banking business in Indonesia grew rapidly. Particularly in Indonesia, a majority Muslim society
Along with the rapid growth of Islamic Banking, there is the problematic application of the primary product of the Islamic Banking based on profit and loss sharing. In Indonesia, based on the Act No.7 of 1992 article 6, Islamic Banking is identical with the primary product profit and loss sharing. In a recent article (Rifki 2009, p.101) Islamic Banking theory recognizes financing allocation into three types which are: (a) Equity-based financing; (b) Debt-based financing and; (c) Benevolent loan and service. Profit and loss sharing concept is included in the category of Equity-based financing. According Sunarto (2003, p.24) transaction of Islamic economic system have two contract, tabarru’ (virtue) and tijarah (business). Tijarah contract is for business and business-oriented. Equity-based financing and Debt-based financing are included in tijarah category.
Amongst all kinds of financing, debt based financing is the most favorite one in particular Murabahah financing. Islamic Bank use it is because (a) Murabahah rate of return is predetermined, fixed and continues (b) Trade financing does not require much efforts to monitor (c) Risk of default is relatively low (Rifki.2009, p.102). Existing trends in some countries that apply Islamic Banking, Murabahah skim as secondary product with a certain margin has large portion, with an average 70% more. Likewise in Indonesia, the implementation of equity-based financing as a primary product of Islamic Banking has a smaller portion because it has a high risk. The cause of high risk is any asymmetric information between Bank/Owner of the funds (shahibul mall) and Client/Entrepeneur (mudharib).
Antonio (2001,p.90) said that there are four types of major contract in Equity-based financing which are Mudharabah (trustee partnership), Musharakah (joint venture), Muzara’ah (harvest yield profit sharing), and Musaqot (plantation management fee based on certain portion of yield). But the principle of the most popular and widely used by Islamic Banking in Indonesia from Equity-based financing is musharakah and mudharabah. Focus of this paper is how to solve problems of asymmetric information on Equity-based financing product specifically musyarakah and mudharabah which if not mitigated will create moral hazard for entrepreneurs and at the end will harm the development of Islamic banking.
Business as part of economic activity is always a vital role in human life throughout the ages. Economic interests will influence the behavior for all levels of the individual, social, regional, national, and international. Muslims have long been involved in economic activity since the fifteenth...