Assessing the Mudharabah Product Offered by the Islamic Micro Finance Institutions in Riau Archipelago Indonesia

Abstract

risk sharing) product offered by the Islamic micro finance institutions in Riau Archipelago Indonesia. This study employs the descriptive analysis based on syariah perspective. As a result, the study found that the product of mudharabah (profit and risk sharing) offered by Islamic micro finance institutions in Riau Archipelago Indonesia were problem and not totally Islamic. The most reasonable arguments of the problem were derived from the operating system of Islamic banking and financial institutions which is parallel with the conventional counterparts that prohibited by Islam. The problem are as follows: (1) conflict in dual system of funding and financing based on the concept of real mudharabah and mudharabah musytarakah; (2) Islamic banking and financial institutions do not have real business; (3) Islamic micro finance institutions in Riau Archipelago Indonesia are not able to bear losses; (4) Islamic micro finance institutions customers are given profit sharing, whereas some of the cutomers funds have not yet been invested; (5) and profit sharing calculation method is convoluted or complicated. Therefore, to overcome the significant problem, it is necessary to reform the current operation of Islamic micro finance institutions in Riau Archipelago Indonesia system. Besides that, the optimalization of the Shariah supervision (al-raqabah syariyyah) aspect should be taken positively and seriously by the National Syariah Council of the Indonesian Ulama Council in order to prevent the Islamic micro finance institutions in Riau Archipelago Indonesia from breaking the Syariah principles and values.