APPLICATION OF THE PRINCIPLE OF JUSTICE IN NON-ADJUDICATIVE SETTLEMENT OF BANKING DISPUTES FROM THE PERSPECTIVE OF ISLAMIC LAW

Abstract

Improving Indonesia's economy is crucial for overcoming poverty, especially post-Covid-19, which caused many business closures. The government introduced the People's Business Credit (KUR) programme to support MSMEs, though some programmes face bad debt issues. In West Bandung Regency, MSMEs use the programme extensively for economic recovery. This research examines whether the Non-Adjudication Settlement model between MSME actors and Islamic banks upholds principles of justice. Using normative and empirical juridical methods, the study incorporates primary, secondary, and tertiary legal materials, along with interviews with MSME actors and KUR-issuing banks. Dispute resolution for problem credits can occur through adjudication (court) or non-adjudication (out-of-court). Islamic banks integrate values from Islamic teachings, encompassing law, morality, and social procedures. For KUR bad credit disputes, Islamic banks are mandated to select processes aligning with Islamic values of truth, justice, and compassion. The non-litigation settlement model is found to reflect Islamic and Indonesian societal values, emphasizing deliberation for consensus and justice. The contribution of this research is to provide an understanding of the effectiveness of the non-adjudication settlement model in handling bad credit in the KUR program, aligning with Islamic values and reflecting Indonesian values. This model can serve as a fairer and more efficient dispute resolution alternative for MSMEs and Islamic banks in Indonesia.