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Islamic Organization and the Perception of riba (Usury) and Conventional Banks Among Muslims: Evidence From Indonesia

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  • Burhanudin Harahap
  • Tastaftiyan Risfandy

Abstract

At least seven verses in the Qur’an and many hadiths highlight that riba (usury) is forbidden in Islam and should be avoided by Muslims. However, when we bring this issue into the modern context, especially its application in economics and banking, Muslims might say differently. Some Muslims with contemporary arguments could say that banks’ interest is not similar to riba because riba is only in the context of excessive lending and taking advantage of others’ needy. We survey 626 people in Indonesia and finds that 93% of Muslims said that riba is indeed prohibited in Islam, but some of them disagree if riba is similar to the conventional bank’s lending-borrowing mechanisms. In this article, we also empirically find that their involvement in the Islamic organization could strengthen their perception that riba is not similar to the bank’s interest rate.

Suggested Citation

  • Burhanudin Harahap & Tastaftiyan Risfandy, 2022. "Islamic Organization and the Perception of riba (Usury) and Conventional Banks Among Muslims: Evidence From Indonesia," SAGE Open, , vol. 12(2), pages 21582440221, May.
    • Handle: RePEc:sae:sagope:v:12:y:2022:i:2:p:21582440221097931
    DOI: 10.1177/21582440221097931
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    References listed on IDEAS

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    1. Pepinsky, Thomas B., 2013. "Development, Social Change, and Islamic Finance in Contemporary Indonesia," World Development, Elsevier, vol. 41(C), pages 157-167.
    2. Saeed Akbar & Syed Zulfiqar Ali Shah & Shahin Kalmadi, 2012. "An investigation of user perceptions of Islamic banking practices in the United Kingdom," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing Limited, vol. 5(4), pages 353-370, November.
    3. Mohammad Omar Farooq, 2012. "Exploitation, profit and theriba‐interest reductionism," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing Limited, vol. 5(4), pages 292-320, November.
    4. Irwan Trinugroho & Tastaftiyan Risfandy & Mochammad Doddy Ariefianto, 2018. "Competition, diversification, and bank margins: Evidence from Indonesian Islamic rural banks," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 18(4), pages 349-358, December.
    5. Rania Kamla & Rana Alsoufi, 2015. "Critical Muslim Intellectuals’ discourse and the issue of ‘Interest’ (ribā): Implications for Islamic accounting and banking," Accounting Forum, Taylor & Francis Journals, vol. 39(2), pages 140-154, June.
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