Definition of Sharia Financing and Sharia Collateral

Sharia financing is the provision of money or an equivalent bill based on an agreement or agreement between the bank and the party financed to return the money or the bill after a certain period of time in exchange for a share of the profit.

Lending / financing for customers based on the principle of profit sharing, buying and selling or lease free of interest determination and provide a sense of security, because what is given to customers is goods not money and no interest charges are set in advance. (Rudy Badrudin and Subagyo: 124)

Financing in Islamic banking according to Al-Harran (1999): 122. divided into 3:

1) Return bearing financing , which is a form of financing that is commercially profitable when the capital owner is willing to bear the risk of loss and the customer also provides profit.

2) Retrun free financing , i.e. the form of financing is not solely looking for benefits aimed at people in need, and no benefits are obtained.

3) Charity financing , which is a form of financing where there are no principal claims for profit and is aimed at the poor in need. (Ascarya: 122)

According to the nature of its use the division of financing is divided into two:

1) Productive financing

Productive financing is intended to meet the needs of production capacity including to increase business, both business production, trade, and investment. This financing is divided into 2 types, including:

  • Working capital financing,financing to meet production needs in increasing finance, the amount of production results quantitatively and qualitatively improve the quality of production results for trade needs and increase the utility of place of a production result in the form of goods.
  • Investment financing,Financing to meet a need such as capital ( capital goods ) aims at increasing related facilities.
  • Consumptive financing, Consumptivefinancing is intended to meet consumption needs where the capacity will run out when used.

Read: Definition of Funding in General

Collateral / Guarantee

According to article 1 number 26 of the Islamic banking law, the understanding of collateral is additional collateral, both in the form of movable and immovable objects which are surrendered by the owner of the collateral to Islamic banks and UUS, in order to guarantee repayment of the obligations of the customer receiving the facility.

Decree of the Board of Directors of Bank Indonesia No. 23/69 / KEP / DIR firmly state that, collateral is material collateral, securities, risk guarantees provided by debtors to repay repayment of a financing, if the debtor cannot repay the loan in accordance with the agreement.

In the Sharia Banking Law that in evaluating collateral of Islamic banks and the Act must:

1) Assessing goods, projects or claim rights financed with financing facilities.

2) Other goods, securities, or risk guarantees added as additional collateral. (Wangsawidjaja, 2012: 285)

Collateral / collateral in the form of assets or goods of type and value will be determined by the bank / financial institution which has a value when approving the request for financing. Collateral is very important in order to guarantee the return of financing made by the customer. (Muhammad, 2000: 28)

(Maftuhin, 2002; 136), argues in his book collateral / collateral is one way to ensure that the rights of creditors or financing customers will not be eliminated and to avoid being “eating” someone’s property in a vanity.


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