The development of Islamic banking in Indonesia got its best momentum in Indonesian struggle to recover the national economy from crisis. Islamic banking has been being accepted by many communities at least as one of the alternatives, in strengthening the financial sector.
Statistics of Islamic banking released by Bank Indonesia in June 2003 shows that the two Islamic banks and seven Islamic banking units hold IDR 5.37 of IDR 1,111.68 billion of total national banking assets (0.48%). Despite their small proportion, the development of Islamic banking in Indonesia evidences a significant process, with the high growth of average annual assets. This situation has further encouraged Indonesian Uleema Assembly (MUI) to issue fatawa on the prohibition of interest to be charged or provided in conventional banking system. Despite the accompanying polemics, this fatawa least of all reminds Indonesian Muslim communities that riba is forbidden in Islam and must be strictly avoided.
[...] The model of homo Islamicus introduced by Islamic economists is, unfortunately, vague since it is speculative in nature and or overly optimistic. The model of homo Islamicus is not but repetitions of certain Islamic normative values –assuming implicit or explicitly that Muslim economic agents will always submit to Islamic values. In the words of Abu- Saud (1992, p. the model of homo Islamicus “drew Muslim economic agents as if they were angels or infallible beings”. Yavas (1999) therefore suggests Islamic economists to seriously take into account both Islamic values and incentives other than Islamic values in analyzing Muslim economic agents' behavior. [...]
[...] By determining as the incentives required by a Muslim to compensate his or her risk averse, then equation can be rewritten as Repeating the similar paths have been used for analyzing equation to or equation to the amount of banking transactions done by the Muslim in Islamic banking is provided by If MUI's fatawa influences the Muslims strongly so that his or her subjective halal confidence level of conventional transactions is zero and his or her subjective halal confidence level of Islamic transactions is unity, then the amount of banking transactions done by the Muslim in Islamic banking is provided by and in conventional banking Conversely, if MUI's fatawa does not influence the Muslims so that his or her subjective halal confidence level of conventional transactions is unity and his or her subjective halal confidence level of Islamic transactions is also unity, then the amount of banking transactions done by the Muslim in Islamic banking is provided by In this regard, a Muslim will allocate all of his or her money in Islamic banking when the profit sharing given by Islamic banking is if , and the quality of services provided by Islamic banking is if . [...]
[...] 90: Chapra, M.U The Future of Economics: An Islamic Perspective. Leicester: The Islamic Foundation. Etzioni, A Dimensi Moral: Menuju Ilmu Ekonomi Baru (Indonesian edition). Bandung: Remaja Rosdakarya. Fehr, EE. and K.M. Schmidt A Theory of Fairness, Competition, and Cooperation. Quarterly Journal of Economics, Vol. CXIV: 817-868. Frank, R.H Microeconomics and Behavior. Boston: Irwin McGraw Hill. Ghazali, M. al- Kimiya as-Sa'adah. In Saleh, A.C. (eds). Kegelisahan al-Ghazali: Sebuah Otobiografi Intelektual. Bandung: Pustaka Hidayah. Jehle, G.A. and P.J. Reny Advanced Microeconomics Theory. [...]
[...] If there is no revelation to be sent down, then there is no Islamic obligation and interdiction. Islamic values are guides for human action, which encompass every aspect of human life and, hence, sanctifies and gives religious significance to activities that may appear the most mundane. This blue print for an ideal life operationalizes the understanding of the Divine Will in terms of human action by providing a scale by which actions can be measured in accordance with their correspondence with the Will of Allah. [...]
[...] MUSLIMS AND ISLAMIC BANKING The impacts of MUI's fatawa on Indonesian Muslims' preference towards Islamic banking can be explained with the concept of utility. Similar to the other economic agents, every Muslim would always seek to combine their consumption so as to maximize their utilities. Since Muslim's horizon of time extends beyond death, a Muslim should, therefore, take into account the variable of Islamic values he or she believes to. For the sake of this analysis, suppose that a Muslim's total utility is determined by the amount of banking transactions he or she does, both in conventional banking and in Islamic banking Suppose also that the amount of banking transactions are positively related to the multiplication between the subjective level of halal confidence ( or and the returns (profit sharing or interest, ) to be given in Islamic or conventional banking plus services to be provided in this two banking systems ( or By determining and , a Muslim's total utility is provided by or, can be rewritten as Suppose further that the total money hold by this Muslim is substitutively allocable for transactions in conventional and or Islamic banking. [...]
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