Academic journal article Researchers World

Sharia Implementation of Principles in the Dynamics of Economics in the Rural System of Java

Academic journal article Researchers World

Sharia Implementation of Principles in the Dynamics of Economics in the Rural System of Java

Article excerpt

INTRODUCTION:

Islamic economic system has been growing fast in Indonesia since 1990s.The movement from the Muslim intellectual group (ICMI-MUI), Muslim entrepreneurs as well as the support from the government regulations became key points in vast growth of Islamic economics (Choiruzzad, 2013).The collaboration of those accounts then resulteds in the establishment of Bank Muamalat Indonesia (BMI) in 1991. BMI is the first public bank that implements sharia principles in its system. The operation of BMI is as per the Act Number 7 Year 1992 about Banking and Government Regulation Number 72, Year 1992 about bank with divident-share principle (Anshori, 2008).

The development of sharia banking is then followed by the non-banking sharia organization. Baitul Maal Wat Tamwil (BMT) is one of the non-banking sharia organizations that grows and develops in the rural area. The existence of BMT contributesin towards the development of microeconomics entrepreneurial works of rural society. In quantity, BMT gives the biggest number among microfinance organizations in Indonesia. There are 9,000 units of LKM in 2010 with 3,307 units of BMT with assets worth of 1,5 trillion IDR (Kuncoro, 2011). The Association of BMT Indonesia (ABSINDO) estimates that there are 5,000 BMT units with assets worth of 4 trillion IDR (Pratiwi, 2016).

The development of BMT in rural area of Java happens along with the evolution of traditional economic system into market economic system. The traditional economic system is organized with sense of community, based on moral values and is oriented to the fulfillment of basic needs, not for profit. Meanwhile, the market economic system is organized individually, liberally and very competitive while trying to get as much profits as possible. The growth of market economic system is slowly destroying the characteristics of rural society (Hayami, 1987). The domination of market economic system differentiates and diverge the living system in rural Java. The farming groupshow sharp decrease in number with the farming land being used for the non-farming necessities. During the period of last decade 20th century, the agrarian economic as the source of living is attenuated due to the government rules and regulations that neglects the agrarian sectors (Breman, 2004). The change in farming land is brought by public and private sectors through political and economical rules put forth by the government. Those changes obviously became disadvantages to farmers (Maguantara, 2005). The diversification of non-agrarian economy does not fully make the rural society prosper, but as another strategy for them in order to survive (Widiyanto, 2010). The agricultural sector remains vulnerable situation as a source of rural livelihoods. There are several factors that cause it. Among others; more narrow agricultural land for switching functions to the settlement, the uncertain climate change, and population growth.

Poverty is the main problem in Indonesia, especially in Java. The number of people who live under poverty reachwere 28,59 millions (11.22% of Indonesian total population) in 2015. Most of them live in the rural area with percentage of 1.94 millions (62.75%), while in the urban area, the number of people who live under poverty reach 10.65 millions (27.25%) (BPS, 2015).

According to financial system of country, the poverty in rural Java is the consequences of the banking system operations that reaches the rural area. The system that runs in the rural area takes the capital from the rural area to the urban area (Didin S. Damanhuri, 2014). As a result of The rural area is then left with the capital shortage so that it is impossible to develop a productive entrepreneurial line. The low productive effort resulted in massive poverty of a rural area. The development of BMT in rural area solved this that problem since most of the capital in BMT is from its members' savings. The capitalization that is managed by BMT also comes from another party, such as sharia banking institution (Utomo, Punto, & et. …

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