Islamic Financial Institutions Course
International Program on Islamic Economic
and Finance
Term II/2010
Lecturer: Sartini, S.E., M.Sc.Acc., Ak
First Week Discussion
 Learning Contract
 Introduction to Islamic Financial
Institution
 Discussion
Learning Contract
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About the Lecturer
Overview of the Subject
Learning Objectives
Learning Methods
Assessment
References
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
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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:
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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
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
Learning Methods
 Tutorial
 Presentation and Discussion
Assessment (1)
Task
Value
Deadline
Presentation &
Discussion
20%
Week 2-6 and 8-12
Assignments
10%
Week 2-6 and 8-12
Essay
Mid Term Exam
10%
30%
After first exam period (week 8)
During first exam period (week 7)
Final Exam
30%
During second exam period (week 14)
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.
Grading System
 How about the university policy?
 What’s about this?
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A : 85-100
B : 65-84
C : 45-64
D : 25-44
E < 24
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.
Subject Organization: Before Mid term Exam
Week
Topic
1
Learning Contract and Introduction
2-3
Islamic Financial Instruments
3
Islamic Banks: Commercial Banks and BPRS
4
IFIs Non-Banks: BMT
5
IFIs Non-Banks: Islamic Leasing, Islamic
Insurance, Rahn
6
IFIs Non-Banks: Islamic Capital Market and
Fund Manager
Subject Organization: After Mid term Exam
Week
Topic
8
Islamic Financial Rules and Regulations
9
Islamic Financial Controls an Supervisions
10
Islamic Public Institutions: Zakat Institution
11
Islamic Public Institutions: Wakaf Institution
12
Lesson from some IFIs and IPIs
13
Overview and Refreshment
Farewell Speeches
Introduction
The Need for This Subject
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 nonMuslim countries.
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
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=c
om_content&do_pdf=1&id=6624
 Budget BI for Economic Shariah Development (8
x Rp 1,3)Direktorat Perbankan Syariah BI (Dr.
Mulya Siregar)
Overview of Islamic Economic
Why Islamic Economic?
Islam as a comprehensive way of life
AQIDAH
SYARIAH
MUAMALAH
SPECIAL RIGHT
IBADAH
PUBLIC RIGHT
INTERIOR AFFAIRS
ADMINISTRATIVE
AKHLAK
ECONOMY
EXTERIORS AFFAIRS
CONSTITUENCY
FINANCE
Zarqa (1959)
Classic Islamic Economist
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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).
Contemporary Interest in Islamic
Economics
Political
Independence
of Moslems
Countries
End of II
World War
Islamic
Resurgence
Desire to be free
of colonial
influence
Need to find
Indigenous
solutions to
socio economic
problems
Rejection of
western
capitalism and
socialism
Answer in
Islamic Heritage
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
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
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
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
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
Outline of Islamic Economics
System
Sector
Public Sector
Private Sector
Social
Welfare
Sector
Major Function
Maintenance of law order, justice and
defense
Promulgation and implementation of
economic policies
Management of properties under state
ownership
Economics intervention if necessary
Creation of wealth
Economic activities
of production,
consumption &
distributions
Islamic Social
Security (al
takaful al
ijtima’i)
Possible
Institution
Government, ministries, and
departments
Statutory bodies
Government companies
Owner operator
Sharikah
Public Sector
(Bait al Mal,
Bait al Zakat)
Private sector
(charitable
org. individu)
Relevant
Syariah Law
Government administrative laws i.e.
company law, commercial law, Land
Various Fiqh of
muamalah laws i.e.
mudharabah,
musyarakah, ijarah,
etc
Various
iftima’I i.e.
zakah, waqf,
tarikhah,
sadaqah, qard
law, taxation law
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
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)
Foundations of
Islamic Institutions and Islamic
Financial System
Islamic Institutions
Characteristics
 Established by
Moslems (majority
owned by Moslem)
For the benefit of
Moslem communities
Operated and regulated
based on Islamic Law
(Syariah)
Type
Thought by Al Qur’an dan As
Sunnah  Solah, Zakah, Hajj
Introduced by ijma’ Ullama
traditional  waqaf, BMT
Introduced by contemporary
Ullama  Islamic Financial
Institutions
“Tidak ada keuntungan bagi orangorang 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)
Islamic System and Institutions
 Didirikan dalam Tasawwur Islam
 Dikelola berdasar moral dan etika
Islam
 Diatur oleh syariah Islam
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)
Daruriyat
 Melindungi:
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Deen (agama)
Nafs (jiwa)
Nasl (keturunan/keluarga)
Mal (harta)
‘Aql (akal)
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.
Tahsiniyyat
 Pemenuhan kebutuhan ini
memberikan peningkatan kualitas
hidup.
 More desirable.
 Contoh: menghindari pemborosan.
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)