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Contract agreement model for murabahah financing in Indonesia Islamic banking

Permata Wulandari (Department Management, Faculty of Economy and Business, Universitas Indonesia, Depok, Indonesia)
Niken Iwani Surya Putri (Department Management, Faculty of Economy and Business, Universitas Indonesia, Depok, Indonesia)
Salina Kassim (Institute of Islamic Banking and Finance, International Islamic University of Malaysia, Kuala Lampur, Malaysia)
Liyu Adikasari Sulung (Department Management, Faculty of Economy and Business, Universitas Indonesia, Depok, Indonesia)

International Journal of Islamic and Middle Eastern Finance and Management

ISSN: 1753-8394

Article publication date: 20 June 2016

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Abstract

Purpose

The purpose of this paper is to measure the pattern of contract agreement process to map various banks’ position in perceiving Sharia conduct. This is done by incorporating the dynamics of culture, market demand and Sharia literacy in different banks. Finding of this research will serve as the formula to map the latent degree of Islamic bank’s commitment to their strategic vision and identity as an Islamic-based financial institution.

Design/methodology/approach

This research develops its theoretical background in classical and contemporary literature review on murabahah contract in Islamic perspective. Focus group discussion (FGD) and in-depth interview are conducted on 32 bankers (in 14 Islamic banks), two National Sharia Council, five academicians and three central bank representatives as an input for qualitative analysis. Content analysis is utilized in this paper to emphasize the process of discovering the relationship between dynamic factors affecting contract agreement process in murabahah scheme in Indonesian banking.

Findings

There are four dimensions affecting the contract agreement: fairness to customer, country regulation, perceived business practicality and product characteristic. The four dimensions are assumed to be influenced with categories proposed, as the category item is mostly repeated and is perceived to be significant in the participant’s perspective.

Originality/value

This research will be beneficial in mapping the determinant of degree of Sharia compliance in Sharia banking in Indonesia, focusing on the contract agreement process.

Keywords

Citation

Wulandari, P., Putri, N.I.S., Kassim, S. and Sulung, L.A. (2016), "Contract agreement model for murabahah financing in Indonesia Islamic banking", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 9 No. 2, pp. 190-204. https://doi.org/10.1108/IMEFM-01-2015-0001

Publisher

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Emerald Group Publishing Limited

Copyright © 2016, Emerald Group Publishing Limited