Legal Politics of the Existence of Fatwa in Islamic Financial Institutions: Evidence from Indonesia

Abstract

Fatwa plays an important role in the development of Islamic financial institutions. However, the existence of fatwa is closely related to developing political dynamics, so it influences the formation of regulations on Islamic financial institutions, especially in Indonesia. This paper discusses the legal politics of the existence of fatwa in Islamic financial institutions established by the National Shariah Council-Indonesian Ulama Council. Normative juridical research method with a comparative approach to various fatwas in Malaysia, Sudan, Pakistan, Indonesia, Singapore, the Philippines and Thailand. The research results show the differences in the existence of fatwas between Muslim-majority and Muslim-minority countries; for example, Muslim-majority countries such as Malaysia, Sudan, Pakistan, and Indonesia are centralized. In contrast, Muslim-minority countries such as Singapore, the Philippines, and Thailand are decentralized. In Indonesia, the fatwa of the National Shariah Council-Indonesian Ulama Council was influenced by the political dynamics of the relationship between the Muslims and government during the New Order and Reformation era. During the New Order era the relationship between the Muslims and government was antagonistic (1966–1981) had critical reciprocity (1982–1985) and was accommodative (1986–1998). In the Reformation era (1998 to present), the relationship between Muslims and the government was accommodative and participatory. The fatwa of the National Shariah Council-Indonesian Ulama Council has been legally binding for Islamic financial institutions since the reformation era (1998 to present) because regulations regarding Islamic financial institutions in Indonesia require that their business activities must be based on the fatwa of the National Shariah Council-Indonesian Ulama Council.