Analysing Collateral Execution in Islamic Banks:

A Perspective on Indonesian Law in Light of Islamic Finance Principles

Ratih Agustin Wulandari

Busyra Azheri

Yaswirman

Wetria Fauzi

 

Abstract: The purpose of this article is to analyse Shari’ah compliance in the execution of collateral in Islamic banking financing in Indonesia. The execution of collateral in Indonesia is based on the Mortgage Rights Law, (UUHT - reflecting the abbreviation of its title in the Indonesian language) provisions for land and the Fiduciary Guarantee Law for movable objects. However, the analysis conducted in this article indicates that the execution of collateral based on these laws does not embody the Islamic law principles of ridhaiyyah (willingness) and ta’awun (mutual help). The execution activities involve elements of riba (usuary), maisir (betting or gambling), gharar (risk or deception), haram (prohibited), and zalim (injustice). To align the practice of collateral execution with Islamic law, the principles of transparency, justice, and tawazun (balance) must be incorporated into the law dealing with the execution of collateral in Indonesia.