Riawan Amin believe there will be a major shift from conventional to Islamic banking in Indonesia

By Kazi Mahmood, IOL Southeast Asia correspondent

KUALA LUMPUR, December 20 (IslamOnline.net) - A recent fatwa by the Indonesian Ulemas Council (MUI) prohibiting bank interest prompted more Indonesians to rush and deposit their money with Islamic-based banks, raising objections from many in the business circle in Indonesia.

"I have already changed my accounts from interest-based banks, that is conventional banks, to Islamic-based ones," Fatimah Sharifah, who deals in export of Indonesian arts and crafts to Malaysia, told IslamOnline.net.

"I fear the fatwa renders any of my transactions through conventional banks illegitimate and my family suffers with 'haram' money," she said.

Islamic-based banks in Indonesia have opened fresh counters in their centers across the capital city Jakarta, which has the most concentration of money transactions, she asserted.

The Bank Syariah Mandiri (BSM), the second largest Islamic bank established in Indonesia after the Bank Muamalat, opened new counters to take fresh accounts, expecting a boost in savings and fixed deposits in the bank.

BSM President Nurdin Hasibuan said earlier the bank had readied fast counters and additional tellers to cash in on the benefits after the fatwa.

The bank announced Thursday increasing its investment projections for 2004 to around Rupiah Rp2.5 trilliun (One USD is equal to Rp8200).

For his part, Achmad Riawan Amin, Director of the Bank Muamalat, expressed conviction there will be a major shift from conventional banks to Islamic banking in Indonesia.

He added that his bank projections too are on the rise and would be in its double fold compared to this years rating.

Islamic banks promised to deal with the numerous complaints received from business people who said they could not obtain loans from the Shariah based banks, which they say applied redundant procedures.

Concerns

However, many in the business circle in Indonesia, used to loan with interests for years, are finding it difficult to deal with the situation and would take a time before thinking of changing their business accounts to Islamic-based ones.

The fatwa has, in fact, raised concern among a host of people in Indonesia, including the Muhamadiyah movement, the second largest Islamic movement in the country.

The movement chairman, Syafyi Maarif, argued the fatwa was bound to create serious problems and that many business people will find it difficult to cope after such a fatwa.

He recalled that the Muhamadiyah group has declared interests-based banking as non-Haram, arguing that interests as practiced by the banks are not the same as practiced during the days of the Prophet Muhammad.

Meanwhile, some small-scale business people expressed indifference to the fatwa, suggesting it might hamper business, reported the Jakarta Post on Friday, December 19.

Most of the people interviewed by the country’s only English paper said they were more interested in access to funds, be it with interest or not, since they were cash trapped and needed the funds badly to round their businesses accounts.

Boosting Islamic Banking 

Nevertheless, the MUI remained adamant on the issue and showed no signs of retracting on the fatwa, issued with the idea of strengthening Islamic-based banking and encouraging more businessmen to take up non-interest loans for their transactions.

"It is part of the Islamization process in Indonesia and since other Muslim countries are successful in Islamic banking and such a success rate is slow in Indonesia, something had to be done to correct that," A. Bakar Hamid, a member of the Ulema in Indonesia, told IOL.

Recent reports indicate that Islamic banking in Indonesia could claim only 5 percent of banking transactions and that these banks were slow in getting customers to deposit their money.

"This is a huge Muslim based market. The people must be taught how to do Islamic based business and money transactions, it will help the country in the long run," added A. Bakar.

The MUI Fatwa Commission had on Tuesday declared as Riba the payment of interest on deposits and loans involving financial institutions such as banks, insurance companies, pawnbrokers and cooperatives.