Syaria Banking: Definition

Sharia Banking, or Islamic Bank, is one form of the national banking operations on the base Syariat (law) of Islam. According Schaik (2001), Bank Islam is a modern form of the bank based on Islamic law is legitimate, developed in the first century of Islam, using the concept of risk sharing as the main method, and negate the financial benefits and assistance, based on the previously determined.

Sudarsono (2004), Bank Syariah financial institutions is the main business of providing credit and other services in the traffic circulation and the payment of money to operate with the principles of sharia. Bank Syariah definition according to Muhammad (2002) in Donna (2006), is the financial institutions that operate with the flowers do not rely on the efforts to provide basic financial services and other traffic in the payment of money circulation and the operation in accordance with Islamic principles Syariat.

Schaik (2001) revealed that there are seven principles of Islamic economics
inspirit the syariah bank, namely:

1. justice, solidarity and similarity;
2. restrictions on the objects and beings;
3. recognition of intellectual property;
4. property should be used with the rational and the good (fair way);
5. no income and no business obligation;
6. general conditions of the credit (including, first, the borrower is experiencing financial difficulties should be treated well, given the time delay, will be even better if given a remission, and second, there are some differences in opinion on the legal difference between spot price and credit, that have yangberpendapat is the implicit interest rate and have also argued that the case is allowed to accommodate the cost of the transaction - not the cost of financing; and
7. risk duality, on the one hand as part of the credit agreement (liability) business, which is productive for the legitimacy of the results, on the other hand the risk should be taken carefully, the risk that is not controlled should be avoided.
   

Taken and translated from Buletin Ekonomika dan Bisnis Islam issued by Economic Faculty Gadjah Mada University