Revisiting Riba: Its Impact on Islamic Banking Innovation in Indonesia

https://doi.org/10.52593/mtq.06.2.04

Authors

  • Adi Susandi Universitas Islam Negeri Sunan Gunung Djati Bandung, Indonesia
  • Nadya Zahra Virliana STIES Saleh Budiman Tasikmalaya, Indonesia

Keywords:

Islamic Banking, Maqashid Sharia, Product Innovation, Regulation, Riba

Abstract

In Islamic finance’s development, riba (usury) remains a significant challenge affecting banking product innovation. This study examines how various interpretations of riba impact product development in Islamic financial institutions in Indonesia. The method used is a qualitative systematic literature review, with data drawn from scholarly works, fatwas issued by the National Sharia Council (DSN-MUI), and the operational practices of Islamic banks. Thematic analysis was used to identify key patterns and issues shaping Islamic financial products. The results show that from classical schools of thought to contemporary Islamic scholars, diverse understandings of riba have driven the formalization of contracts such as murabahah, ijarah, and musharakah. Although legally valid, these contracts often mimic conventional financial mechanisms and do not fully fulfill the ethical objectives of maqāṣid al-shar’iah, raising concerns about the authenticity and long-term credibility of Islamic banking. This study recommends a multidisciplinary approach focused on maqāṣid, encompassing Islamic legal theory, behavioral economics, and sociocultural analysis, to enhance product relevance and integrity. This approach is crucial to maintaining public trust and ensuring the development of Islamic finance as a value-based system responsive to the dynamics of the modern economy.

References

Ascarya. (2017). Islamic Financial Architecture to Promote Financial Inclusion. Journal of Islamic Monetary Economics and Finance, 3(1), 1–20.

Bashir, A. M. (2019). Determinants of customer loyalty in Islamic banking: Evidence from Indonesia. Journal of Islamic Marketing, 10(2), 346–368.

Chapra, M. U. (2008). The Islamic Vision of Development in the Light of Maqasid Al-Shariah. Islamic Research and Training Institute.

El-Gamal, M. A. (2006). Islamic Finance: Law, Economics, and Practice. Cambridge University Press.

Effendi, M. R., Darma, S. H., & Wajdi, F. (2022). The Commodification of Religion in the 2012 Regional Election of Purwakarta Regency. Hayula: Indonesian Journal of Multidisciplinary Islamic Studies, 6(1), 123–150.

Effendi, M. R., Ismail, Y., Darma, S., Wulandari, D., & Adzra, Z. (2022, July). The Theology of Entrepreneurship: The Identity of The Millennial Muslim Student Entrepreneurship Movement in Universities. In Proceedings International Conference on Islam and Education (ICONIE) (Vol. 2, No. 1).

Effendi, M. R., Aulia, R. N., Amaliyah, A., & Salsabila, N. F. (2023). Integration of Prophetic Social Science-Based Islamic Education in Strengthening Students' Religious Diversity. Muttaqien: Indonesian Journal of Multidisciplinary Islamic Studies, 4(2), 161–176.

Hadiyanto, A., Effendi, M. R., Narulita, S., & Wajdi, F. (2020). Islamic Religious Education for Universities. Jakarta: Fikra Publika.

Kholid, M. (2015). Islamic Banking Product: Between Substance and Form. Journal of Islamic Economics La_Riba, 9(2), 101–120.

Rahman, F. (2021). Fatwa dynamics in shaping Islamic banking product development: Lessons from Southeast Asia. Review of Islamic Economics, 25(1), 75–95.

Rizal, S., & Lubis, M. A. (2020). Inclusivity of Islamic Financial Products in Encouraging Equitable Economic Growth. Journal of Iqtisaduna, 6(1), 56–70.

Yusof, M., & Shamsiah, F. M. (2020). Value-Based Intermediation and Financial Sustainability in Islamic Banks. International Journal of Islamic and Middle Eastern Finance and Management, 13(2), 321–342.

Effendi, M. R. (2021). Islamic Theology: A Portrait of the History and Development of Kalam School of Thought. Literacy of the Archipelago.

Hasan, Z. (2020). Riba, Interest and Six Hadiths: Do We Have a Definition or a Conundrum? Review of Islamic Economics, 24(2), 157–180.

Iqbal, M., & Mirakhor, A. (2011). An Introduction to Islamic Finance: Theory and Practice. John Wiley & Sons.

Ismail, A. G. (2010). Money, Islamic Banks and the Real Economy. Cengage Learning Asia.

Khan, T. & Ahmed, H. (2001). Risk Management: An Analysis of Issues in the Islamic Financial Industry. Islamic Research and Training Institute.

Kuran, T. (2004). Islam and Mammon: The Economic Predicaments of Islamism. Princeton University Press.

Lewis, M. K., & Algaoud, L. M. (2001). Islamic Banking. Edward Elgar Publishing.

Obaidullah, M. (2005). Islamic Financial Services. Islamic Economics Research Center.

Saeed, A. (1999). Islamic Banking and Interest: A Study of the Prohibition of Riba and Its Contemporary Interpretation. Brill.

Usmani, M. T. (2002). An Introduction to Islamic Finance. Idaratul Ma'arif.

Vogel, F. E., & Hayes, S. L. (1998). Islamic Law and Finance: Religion, Risk, and Return. Brill.

Published

2025-07-31

How to Cite

Susandi, A., & Virliana, N. Z. (2025). Revisiting Riba: Its Impact on Islamic Banking Innovation in Indonesia. Muttaqien; Indonesian Journal of Multidiciplinary Islamic Studies, 6(2), 164–173. https://doi.org/10.52593/mtq.06.2.04

Issue

Vol. 6 No. 2 (2025): Muttaqien; Indonesian Journal of Multidiciplinary Islamic Studies

Section

Articles
Copyright & Licensing

Copyright (c) 2025 Adi Susandi

Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Muttaqien; Indonesian Journal of Multidiciplinary Islamic Studies allow the author(s) to hold the copyright without restrictions and allow the author(s) to retain publishing rights without restrictions and authors who publish with this journal agree to the following terms:

1) Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
 
2) Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this journal.
 
3) Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work.

In developing strategy and setting priorities, Muttaqien; Indonesian Journal of Multidiciplinary Islamic Studies recognize that free access is better than priced access, libre access is better than free access, and libre under CC-BY-SA or the equivalent is better than libre under more restrictive open licenses. We should achieve what we can when we can. We should not delay achieving free in order to achieve libre, and we should not stop with free when we can achieve libre.

Muttaqien; Indonesian Journal of Multidiciplinary Islamic Studies has a CC-BY SA license or its equivalent as the optimal license for publication, distribution, use and reuse of scientific work. This license is under a Creative Commons Attribution 4.0 International License.

Creative Commons License

You are free to:

  • Adapt — remix, transform, and build upon the material for any purpose, even commercially.
  • The licensor cannot revoke these freedoms as long as you follow the license terms.

Similar Articles

1 2 > >> 

You may also start an advanced similarity search for this article.