OPPORTUNITIES AND CHALLENGES FOR ISLAMIC FINANCIAL INSTITUTIONS IN FACING THE FREE MARKET ERA

OPPORTUNITIES AND CHALLENGES FOR ISLAMIC FINANCIAL

INSTITUTIONS IN FACING THE FREE MARKET ERA

Introduction

Free market (free market, duty free) is often referred to as free trade. Both refer to a

situation in which markets or trade are organized by minimizing restrictions (demarcations)

that are considered to hamper economic activity. The free market marks a paradigm leap in

translating the patterns and concepts of cross-border trade.

It cannot be denied that the current world economy shows a pattern of relationships

(markets, trade) between countries that are increasingly unconstrained by distance and

regulation. The implication is that the traffic of goods and services as market products is

increasingly open and massive from time to time. The openness of the economy and trade

practically creates challenges and opportunities for market (trade) actors. The more open

trade between one country and another can provide opportunities for increased market

access for domestic products in the international market as well as challenges to the

competitiveness of domestic industries against foreign products.

Historically, it can be said that the free market or free trade is rooted in the classical

economist's idea that the implementation of international trade activities should be carried

out without tariff or non-tariff barriers. The implementation of such a free market is

expected to improve the welfare of the world community.

Islamic financial institutions have become the most important and rapidly growing

instrument in the economic system of mankind.3 In United States, the existence of Islamic

financial institutions is a system that has long been awaited by the community, especially

United States Muslims who long for financial and banking services in accordance with

Islamic law.4 The existence of Islamic financial institutions is the right solution for financial

institutions, including for non-interest banking institutions. Therefore, if the interest system

causes negative spread, then banks can look for other solutions, such as the profit-sharing

system offered by Islamic banks.5

In line with the beginning and increasingly massive free market, the financial sector

in United States is increasingly prevalent with the presence of Islamic financial institutions

marked by the operation of Bank Muamalat United States in 1992. Although United States is

a country with a majority Muslim population, United States is not the first country to

implement Islamic financial institutions. The development of Islamic financial institutions is

spearheaded by Islamic banking, the idea of a bank that uses a profit-sharing system has

been around for a long time, marked by the many Muslim thinkers who wrote about the

existence of Islamic banks which can be categorized as the predecessor idea of Islamic

banking.6

In addition to demographic factors that support the birth and development of Islamic

financial institutions, external factors also influence the development of Islamic financial

institutions. World financial institutions such as the World Bank and the International

Monetary Fund (IMF) make Islamic financial institutions one of their main programs.7 Thus,

it can be understood that globally, the presence of Islamic financial institutions is a necessity

in world economic activities.

In principle, the existence of Islamic financial institutions is not only part of the

economic system, but also part of the overall social system. By Therefore, its existence must

be seen in the context of the overall existence of society (humans), along with the values that

surround it. Islam rejects the view that economics is a value-neutral science. In fact,

economics is a value-oriented science.

Along with these opportunities for Islamic financial institutions, there are also

various challenges, especially in the context of the free market. The free market requires the

reduction of tariff and non-tariff barriers. The free market also emphasizes the granting of

the widest possible freedom to market actors to produce and distribute goods and services

freely and unconstrained by complex regulations and/or manipulative bureaucracy. Thus, the

free market creates a situation of intense competition and requires market players to be

careful in formulating and executing their business strategies.

In facing the free market era, Islamic financial institutions will certainly face various

challenges. Therefore, in addition to readiness to face these challenges, Islamic financial

institutions must be more careful and intelligent in utilizing the opportunities that exist. This

is because the free market will soon present two sides at once, namely challenges and

opportunities. This brief will identify positions and strategies that may be implemented by

Islamic financial institutions to maintain their existence in the face of competition and free

market dynamics.

Discussion

Opportunities for Islamic Financial Institutions in the Free Market Era

Free market is an economic concept that refers to the sale of products between

countries without import-export taxes or other trade barriers. Free trade can also be defined

as the absence of artificial barriers (government-imposed barriers) to trade between

individuals and companies located in different countries. International trade is often

restricted by various country taxes, surcharges applied to imported and exported goods, as

well as non-tariff regulations on imported goods.

The free market era is characterized by an important phenomenon in the economic

field. The world's economic activities are not only limited by the boundaries of geography,

language, culture and ideology, but more because of the need and interdependence of each

other. The world has become borderless, especially due to the rapid development of

information technology. This situation creates many opportunities as well as challenges,

especially in efforts to develop the Islamic economy9 .

The opportunities for Islamic financial institutions in the free market era continue to

be encouraging. This, among others, can be seen from the various growths achieved. In 2007

the total assets of Islamic financial institutions only reached 38 trillion, then in 2012 it

reached 247 trillion. The share of Islamic finance increased from 4.9 percent to 19.2 percent

in 2012. At first, it was only dominated by Islamic banking, but now it is evenly distributed

to various institutions such as Islamic insurance, Islamic financing institutions, Islamic

guarantee institutions, Islamic pawnshops and Islamic venture capital companies. According

to Ma'ruf Amin, the growth of Islamic financial institutions which reached 34% has

exceeded the growth of conventional financial institutions which is only 15-20%.

After the establishment of the IDB in 1975, countries in the Middle East region have

also established a number of Islamic Banks, including Dubai Islamic Bank and Faisal

Islamic Bank, followed by Bahrain Islamic Bank in 1979. In the 1980s, Islamic banks were

also established in Southeast Asia. Some of them are Bank Islam Malaysia Berhad (1983)

and a number of Islamic BPRs in United States. Until now, there are three countries that

fully implement the Islamic economy, including Islamic banking. These three countries are

Pakistan (1962), Iran (1982), and Sudan. Sudan has implemented the Islamic economic

system in all banking activities in the country in July 1994.

United States is a fertile ground for the growth of the Islamic economy because

United States has great potential for it. Some of these potentials include United States

participation in various groups of countries, such as the G20, MEA and APEC. In addition,

United States is the largest Muslim country in the world, United States also has a long

development experience by adopting socialist and capitalist systems and this is an asset to

build an United States economic system based on religion and cultural personality. In

addition, the country's constitution and economic ideology Pancasila are in line with Islamic

economics.

The prospect of the national Islamic financial industry is currently very good and

quite bright, both Islamic banking and Islamic insurance and others. The assets of the

Islamic financial industry continue to increase significantly. For the next few years it is

predicted that there is still a great opportunity to continue to increase. Currently, the market

share of Islamic banking is almost 4 percent, and in the next year it is estimated to reach 5

percent. This prediction is based on the growth trend of the Islamic financial industry so far,

especially at this time in Aceh has been implemented the sharia banking system for all banks

in Aceh and is planned to be followed by West Nusa Tenggara.

It is important to note that the United States market is still wide open. This is what

distinguishes United States from the Middle East, Europe and Malaysia. If the Middle East

depends on oil production, so does Europe, European banks hold a lot of funds from Middle

Eastern oil entrepreneurs, so they remain dependent on Middle Eastern oil production,

therefore the growth trend has recently been mediocre, ranging from 10 to 15 percent a year.

While Malaysia, the development of Islamic finance is supported by the government. Of the

Islamic banking assets reaching Rp 600 trillion, 90 percent are government funds (BUMN),

so only 10 percent of public funds are around Rp 60 trillion.

Comprehensively, the third party funds of Islamic banks in United States are still far

more than the third party funds of Islamic banks in Malaysia. The vast untapped Islamic

market can be seen from the fact that there are more than 200 million Muslims in United

States and their Islamic awareness continues to increase. This represents a wide market

opportunity for the Islamic finance industry. Demand for the presence of Islamic financial

institutions in various places continues to increase. In line with that, the momentum of the

global financial crisis has brought wisdom to the development of the Islamic industry in

United States.

Even the growth of sharia cooperatives with the 212 label, and ICMI's plan to

establish the United States Waqf Venture Bank with a sharia venture capital system which is

expected to operate in June 2017, as well as the emergence of other sharia business ventures

such as sharia hotels, sharia travel, moreover there is a trend of developing halal products,

all of which provide opportunities as well as challenges for the growth of Islamic financial

institutions in the future.

The economic crisis that has occurred around the world recently shows that the

world and United States need another concept in organizing their economy, and Islamic

economic institutions are the most appropriate choice. Therefore, to meet the needs of the

market, in addition to educating the public, more Islamic banks and insurance are needed,

and thank God there are now many Islamic insurance as its counterpart, which even exceeds

the number of Islamic banking institutions.

Islamic economic institutions continue to contribute to economic growth and

development, especially in modern industrial societies. Large-scale production with

investment needs that require large capital cannot be fulfilled without the help of financial

institutions. Financial institutions are the foundation for entrepreneurs to get additional

capital through credit mechanisms or Islamic financing, as well as facilitating economic

transactions, as well as being a foundation for investment through saving or deposit

mechanisms. Islamic financial institutions have played a very large role in distributing

economic resources among the community, although they cannot fully represent the interests

of the wider community.

Since its establishment in the nineties, periodically, the performance of Islamic

financial institutions has always shown a positive increase from time to time. The increase

can be seen from various financial and non-financial aspects. In the financial context, the

increase can be seen from the increasing value of assets of Islamic financial institutions.

Meanwhile, in addition to financial aspects, various types of financial institutions and the

number of offices continue to grow, an indicator of the continued development of business

activities in the field of Islamic financial institutions.

The opportunities for Islamic financial institutions have also been supported by the

development of Islamic economic institutions and legislation in United States which has

been quite widespread in the last 10 years. The struggle to legislate Islamic financial

institutions in United States began to show results, with the mention of Islamic banking in

Law Number 7 of 1992 then amended to Law Number 10 of 1998 concerning Banking,

followed by the enactment of Law Number 21 of 2008 concerning Islamic Banking.

Law No. 21/2008 on Islamic Banking explains the institutional aspects, business

activities in accordance with sharia principles, governance, supervision, dispute resolution,

and sanctions for violations of the law. The Sharia Banking Law stipulates that the

application of sharia principles in business activities refers to the MUI fatwa and sharia

principles are also positivized into BI regulations (now by OJK) with the assistance of the

Sharia Banking Committee (now the Sharia Financial Services Development Committee). In

addition, a number of legislations are also part of the legal framework of Islamic banking,

including the Law of the Republic of United States Bank United States, OJK Law, LPS Law,

Limited Liability Company Law, Tax Law, and others.

The position of the Syariah Banking Law is a lex specialis of the Banking Law. This

is because the Islamic Banking Law is a law that specifically regulates Islamic banking.

Meanwhile, the Banking Law regulates banking in general, both Islamic banking and

conventional banking. One of the principles of legislation is lex specialis derogat legi

generalis, which means that special laws override general laws. Thus, if there are different

arrangements in the Islamic Banking Law than those regulated in the Banking Law, the law

used is the Islamic Banking Law.

Challenges for Islamic Financial Institutions in the Free Market Era

Basically, the purpose of a free market is positive at first glance, namely so that a

country's economy can be more advanced and developed. Various studies show that world

trade will increase with the implementation of a free market system. An increase in trade

volume means an increase in production, which also means an increase in employment and

ultimately an increase in income and welfare. However, in practice and development, free

markets can also cause negative excesses and new problems.

Facing the free market era, of course, Islamic financial institutions will face new

challenges in addition to having opportunities. Therefore, it is necessary to think about and

prepare anticipatory steps in dealing with these conditions. Including there will be a

tendency in economic development in the global era to pay more attention to ethics in

economic activity.

Because the free market is a requirement of globalization, extra preparations must be

made. In addition, we must proactively anticipate the possible adverse impacts of the free

market, especially for the development of small businesses. In theory, anticipation is simple,

namely increasing competitiveness. This increase in competitiveness must come from

increased efficiency and productivity (increased added value), and cannot be achieved

through other means. Protection can temporarily still be used for support competitiveness in

the domestic market. It must also be gradually removed. The sooner, the better, because

protection makes some lines of the economy produce efficiently.

Increased competitiveness to win the free market battle in the world market can be

realized by several factors, including improving the quality of human resources, mastering

technology and strengthening institutions. All economic policies, both macro and sectoral,

monetary, fiscal and real sector, must be directed within this framework.

Local governments in the autonomy era must proactively make constructive

breakthroughs to anticipate the free market, including by determining the right core business

and superior products from a region. Local governments should be proactive in organizing

human resource training and should cooperate with universities in implementing the

program. Thus, the people's economy can be empowered to enter the free market.

There are at least five challenges for the financial services industry, including for

Islamic financial institutions, namely:

 Products that are suitable for the ASEAN market, meaning that Islamic financial

institutions must be able to provide products that meet the needs of the ASEAN

market;

 The health level of the company, Islamic financial institutions must really have a

healthy company, sufficient capital, proportional debt, and smooth performance;

 Business efficiency, Islamic financial institutions must be able to operate efficiently;

 Competitiveness of human resources (HR), Islamic financial institutions must have

reliable, professional, and trustworthy human resources;

 Safeguarding business interests and national interests. Islamic financial institutions

must be able to carry out the task of maintaining business interests and national

interests in a harmonious, proportional and responsible manner.

In connection with the dynamics of the Islamic economic movement itself, in

accordance with global economic developments and the increasing public interest in the

economy and Islamic banking, Islamic economics faces a variety of problems and major

challenges. In its young age, there are at least five problems and challenges facing Islamic

economics today, namely:

 There is still a lack of qualified Islamic economic experts who master modern

economic sciences and sharia sciences integratively;

 A test of the credibility of its economic and financial system;

 Regulatory, legal and policy tools, both on a national and international scale are still

inadequate;

 There are still limited universities that teach Islamic economics and the lack of

tranining and consulting institutions in this field, so that human resources in the field

of Islamic economics and finance are still limited and do not have adequate

knowledge of Islamic economics;

 The role of the government, both executive and legislative, still needs to be improved

towards the development of Islamic economics, due to their lack of understanding

and knowledge of Islamic economics.

With 250 million people in United States, it is too tempting not to tap into them.

However, despite the ease of regulation for the expansion of the Islamic finance and banking

industry from Malaysia and Singapore, for example, there are many unwritten matters that

tend to complicate things. Therefore, it is very necessary for the national industry to prepare

itself and maintain its market in the country. To strengthen domestic Islamic financial

institutions, the Financial Services Authority has issued rules for Sharia Insurance to

increase its capital to Rp 50 billion and full pledge limited companies (PT), as well as Rp 25

billion for sharia business units owned by conventional insurance. In addition, the Financial

Services Authority has also issued rules for the solvency ratio (risk-based capital / RBC) of

Islamic Insurance.

Local Sharia Insurance companies are strong and healthy, so they will be better

prepared to compete with foreign parties. Not only from the company side, the Financial

Services Authority encourages the improvement of the quality of Sharia Insurance human

resources. Now Islamic insurance competency standards already exist, including

conventional. The Financial Services Authority revealed a number of steps that were

prepared were: First, developing a regulatory framework that supports the development of

capital markets and Islamic financial institutions. Second, developing capital market

products and Islamic non-bank financial services. In addition to these two strategies, OJK

will also strive for the equality of Islamic financial products with conventional products,

improve human resource development in the capital market, and encourage the improvement

of the quality of good corporate governance.

The challenges (threats) that are now being faced by Islamic financial institutions

must be able to face the competition of the Asean Economic Community (AEC) which

provides opportunities for free competition in the flow of trade and services as well as

professional labor markets such as advocates, accountants, banking experts and others, as

well as international agreements such as AFTA (Asean Free Trade Area), NAFTA. (North

Atlantic Free Trade Agreement), all of which are challenges and threats for Islamic

economic actors. Therefore, in addition to the master plan development program, several

activities were also carried out in facing the free market by providing education and

promotion of the Islamic financial industry, increasing access to information on Islamic non-

bank financial industry products and developing a supervisory and guidance framework that

supports the Islamic non-bank financial industry business.

Regarding the strengthening of the Islamic financial institution system, there are at

least two important things related to the strategic role of Islamic financial institutions in

facing various challenges, namely as follows:

 Strengthening the Legal System of Islamic Financial Institutions

Strengthening the legal system of Islamic financial institutions basically includes two

important objects, namely: First, strengthening the legal system relating to the application

and mechanism of Islamic financial institutions. Second, strengthening the legal system

relating to the settlement of sharia economic cases in the event of a dispute. In this second

case, it is necessary to strengthen the existence of religious courts. So far, the role of

religious courts in United States is far more progressive compared to similar institutions in

Muslim-majority countries. Legal products produced by religious courts have shown that

Islamic law is not only produced through the ijtihad of scholars but also by judges through

their decisions. Therefore, Islamic law can be found in four different places, namely: fiqh

books, fatwas of scholars, laws, and court decisions.

Religious Courts are a representation of the existence of Islamic law in United States.

Therefore, the discussion of religious courts cannot be separated from the history of Islamic

law in United States. Law is a prerequisite for realizing an orderly and just society.14

Because law is a symptom, a phenomenon association.15 Law as a symptom of association,

actually does not only concern the field of work and physical actions of humans, but the

association of human life is a psychological interdependence.

The progressiveness of the religious judiciary was able to reposition court decisions

on other Islamic laws that had developed earlier. This fact is due to the fact that fiqh material

is often not in accordance with the cases submitted to the court, while the arrangements in

the law tend to be incomplete, so it is natural that court decisions have an important position

in the reform of Islamic law.

Different perspectives and interpretations in the diversity of Muslim understanding

of the nature of Islamic law have implications in the angle of application.18 Some of the

things that have contributed to enriching the field of Islamic legal thought, as described

above, are believed to have a considerable influence in the process of transforming Islamic

law in United States, especially in the independence and development of the Religious

Courts after the one roof system under the Supreme Court.

 Strengthening the Human Resources (HR) of Sharia Economic Actors

As with the strengthening of the legal system, the strengthening of human resources

also involves two things: First, human resources related to technical implementation.

Second, human resources related to the settlement of sharia economic disputes, in this case

including Religious Court judges. Islamic financial institutions have experienced growth and

development over a long period of time since Islam became a political force in United

States.19 In line with the increasingly complex legal dynamics, religious courts are trying to

appear as an institution that is a pillar for the successful enforcement of the rule of law.

Therefore, the existence of religious courts needs to be strengthened by normative rules that

give broad authority (jurisdiction) to religious courts.

The wider development of Islamic financial institutions must be balanced with an

increase in human resources (HR), court apparatus, adequate facilities and infrastructure,

and applicable legal provisions. Thus, the new paradigm of religious courts can truly answer

the demands and legal problems that develop in society. As agents of change, human

resources within the religious courts should be qualified, dedicated, responsible, caring,

visionary and communicative.

Human resource procurement (recruitment) here can be interpreted as a process of

activities to fill vacant formations, starting from planning, announcement, application,

screening to appointment and placement. The procurement referred to here is broader in

meaning, because procurement can be one of the efforts of utilization. So, procurement here

is an effort to find candidates from within the organization or from outside to fill positions

that require qualified human resources. So it can be recruitment from outside and

recruitment from within.

One of the important resources in management is human resources. The importance

of human resources needs to be realized by all levels of management. No matter how

advanced technology is today, the human factor still plays an important role in the success of

an organization. Human resource management is an important part, it can even be said that

management is essentially human resource management or human resource management is

synonymous with management itself.

Strengthening human resources in religious courts is also done by preparing

regulations needed to fill legal gaps, both material and formal in the field of family law. The

Supreme Court has made efforts to improve the quality of religious court judges by

organizing various trainings and technical guidance. The Supreme Court also established

cooperation with various parties, both domestic and foreign, to provide opportunities for

religious court judges to deepen and broaden their understanding of Islamic family law.

Based on this description, the preparation of human resources and internal

infrastructure of Islamic financial institutions has been carried out to the maximum. In fact,

the preparation of human resources and internal infrastructure of Islamic financial

institutions has been carried out since the strengthening of Islamic banking institutions in

United States. Broadly speaking, the response is in the form of two strategic steps, namely

the preparation of regulations and improving the quality of Islamic economic actors

including religious court judges.

The Supreme Court's Efforts to Support the Development of Islamic Financial

Institutions in Facing the Free Market Era

As mentioned above, religious courts as the representation of the Supreme Court in

handling sharia economic cases in United States, have strengthened two systems, namely:

First, improvement of facilities and infrastructure. Second, the system of strengthening

regulations. Third, the system of strengthening human resources. The United States Supreme

Court in realizing the new authority of the religious courts has established several policies,

among others:

 Improving Facilities and Infrastructure

In principle, the Supreme Court has attempted to build a positive image of the

judiciary through various programs based on the directives in the 2003 Blueprint.23 In its

development, after being given the authority to handle the settlement of sharia economic

disputes to the Religious Courts through Law Number 3 of 2006 concerning Amendments to

Law Number 7 of 1989 concerning Religious Courts, it is also intended to stimulate the

development of Islamic financial institutions through the Religious Courts.

The Supreme Court has made various efforts to improve the facilities and

infrastructure of religious courts, both in terms of physical buildings and equipment. The

Supreme Court has prepared a representative place and building so that it is comfortable and

feasible to hear cases economy. In addition, the modernization of the literature of the

Religious Courts has been supplemented by the addition of the literature of the Commercial

Court or the Sharia Economic Court. Based on these facts, the task and role of the Supreme

Court becomes increasingly challenging, when more and more specialized courts are

established under a judicial environment.

The preparation of facilities and infrastructure within the Supreme Court is very

important because it is part of the Quality Assurance process. The results of the Quality

Assurance process on the implementation of the Second Wave of Reforms in the Supreme

Court and the lower judiciary have shown that the performance score of the bureaucratic

reform of the Supreme Court and the judicial bodies managed to pass 70 or in the good

category.

 Regulatory Strengthening System

To strengthen regulations, the Supreme Court has made various efforts, including

preparing various laws and regulations governing Sharia economic regulations such as

establishing several Supreme Court Regulations (PERMA) which serve as references to

matters that have not been regulated in existing laws and Supreme Court Circular Letters

(SEMA) as instructions and implementation guidelines for judicial officers in carrying out

their judicial processes.

Strengthening the regulatory system is marked by the preparation of several

regulations on Islamic financial institutions, including the compilation of the Compilation of

Sharia Economic Law (KHES) enacted by PERMA Number 2 of 2008 which is a source of

material law for Islamic economics in addition to other sources of law. In addition, sharia

economic procedural law has also been compiled in the form of the Compilation of Sharia

Economic Procedure Law (KHAES), which was later enacted by PERMA Number 14 of

2016 concerning Procedures for Settling Sharia Economic Disputes and this condition can

invite public trust in religious courts.

 Improving Technical Capability of Human Resources

The Supreme Court has made efforts to improve the technical capacity of religious

court human resources by cooperating with several universities to educate religious court

officials, especially judges in the field of religious justice in the field of Islamic economics.

The Supreme Court has organized activities that include education and training, both at

home and abroad.

For the settlement of cases in a technical context, it has also regulated the formation

of a special panel consisting of trained and certified judges as mandated by the 2006

Rakernas in Batam, and streamlined the time for resolving sharia economic disputes and

facilitated various procedures for litigation and sought to improve services based on

information technology.

Recently, Sharia Economic Judge Certification education was held at the Bogor

Supreme Court Training Center attended by 128 participants in order to fulfill the mandate

of PERMA Number 5 Year 2016 concerning Certification of Sharia Economic Judges. The

education lasted for 12 days and for participants who passed, they were appointed by the

Chief Justice of the Supreme Court as Sharia Economic Judges.

To overcome the shortage of certified judges, the Supreme Court, in this case the

Director General of Badilag, in collaboration with the local PTA, or the Financial Services

Authority, has organized a functional training for Sharia economic judges, which to date has

been educated by 1,000 judges. The Directorate General of Badilag, in cooperation with the

local PTA, or the Financial Services Authority, has organized a functional training for

Sharia economic judges, which to date has been educated by 1,000 judges. The Directorate

General of Badilag has also sent religious court officials to study abroad, such as to Saudi

Arabia, which has reached the fourth batch of 40 people per batch, to Sudan, England,

Bahrain and so on to study at the doctoral or postgraduate level, or workshops for only 2

months.

Human resource development is part of the Supreme Court's strategic policy to

ensure that judicial organizations are always filled with competent, passionate and

committed personnel. Various factors are always considered by the leadership of the

Supreme Court in managing the composition of its human resources.

 Establishing formal and material law

The Supreme Court has sought the establishment of formal and material law to guide

the religious judicial apparatus in examining, adjudicating and deciding sharia economic

cases. The enactment of Law No. 3 of 2006 concerning the amendment to Law No. 7 of

1989 concerning Religious Courts has increased the authority of the Religious Courts to be

broader, especially in the field of sharia economics. Moreover, after the decision of the

Constitutional Court Number 93/PUU-X/2012 on August 29, 2013, by ending the legal

uncertainty that has been complained about by many parties, because there is a choice of

forum in the settlement of sharia economic disputes. The increase in authority is a mandate

that must be implemented wholeheartedly.

The optimal role of the Religious Courts must at least be realized in two ways. First,

providing justice for the parties to the dispute so that they are satisfied with the resulting

decision. Second, to make a positive contribution to the development of the Islamic

economy in United States, which has now become 'The Biggest Islamic Retail Banking in

the World'.

The next resection and response is regarding the Capacity Building of Human

Resources (HR) in the religious court environment, namely judges must have insight and

knowledge of sharia economics, although every judge of the Religious Court is generally an

alumnus of the Faculty of Sharia who has studied fiqh mu'amalah, but it is very important to

improve themselves to increase insight and knowledge that will enrich and strengthen the

professionalism of religious court services.

 Improving Systems and Procedures

The Supreme Court has improved systems and procedures so that matters relating to

sharia economy can be carried out simply, easily and at low cost. Along with the increasing

public demand for satisfactory service from judicial institutions, it is only natural that the

Supreme Court strives to improve its ability to serve the public. One of the prerequisites in

that direction is to improve the quality of human resources, judicial administration, budget

preparation, effective education and training concepts, orientation activities with economic

law experts in general and sharia economic experts in particular, including practitioners of

the banking world and the sharia economy.

Therefore, efforts to improve and encourage the readiness of the judiciary in facing

its new tasks are optimally pursued in various positive and effective ways. Encouraging

religious court officials to learn more deeply about sharia economic disputes from various

aspects, because the resolution of sharia economic disputes is a new authority within the

religious courts and covers a very broad range of matters, including: Sharia Banks,

Microfinance Institutions Sharia, Sharia Insurance, Sharia Reinsurance, Sharia Mutual

Funds, Sharia Bonds, Sharia Medium Term Securities, Sharia Securities, Sharia Financing,

Sharia Pawnshops, Pension Funds of Sharia Financial Institutions, Sharia Businesses, and

others.

Mahkamah Agung telah merespons cepat kewenangan Pengadilan Agama di bidang

ekonomi syariah dengan membentuk tim yang bertugas menyusun perangkat hukum materiil

dan formil sebagai landasan hukum mengadili sengketa, dengan mengeluarkan surat

keputusan Nomor: KMA/097/SK/X/2006 dated October 20, 2006 on the establishment of

the Compilation Team for the Compilation of Sharia Economic Law (KHES) which is

tasked with collecting and processing relevant material, compiling a draft KHES text,

holding seminars that review the draft text by involving elements of institutions, scholars

and experts in sharia economics, which finally the team succeeded in compiling KHES as a

guideline for sharia principles for Religious Court judges in examining, adjudicating and

resolving cases related to sharia economics, and then published in the form of PERMA

Number 2 of 2008.

 Organizing Education and Comparative Studies

The Supreme Court has organized education and conducted comparative studies

abroad regarding sharia economics, and various other important steps. Education and

training on sharia economics internally has been handed over to the Supreme Court's

Litbang Diklat Kumdil Agency, while the technical guidance for its implementation is

delegated to the Religious High Court. It is hoped that the training in the field of Islamic

economics organized by the Supreme Court's Kumdil Training and Development Agency

can produce judges with quality, integrity and intellectuality.

In terms of sharia economic training abroad, the Directorate General of Badilag of

the Supreme Court has been cooperating in the field of education and training with the

College of Law of Imam Muhammad Ibn Saud Islamic University in Riyadh since 2008.

This cooperation was followed by sending religious court judges to attend sharia economic

training in Riyadh Saudi Arabia and several batches have been conducted. Starting with the

first batch in 2008 which was attended by 38 (thirty-eight) religious court judges from all

over United States. The second batch in 2012 was attended by 40 (forty) judges. The third

batch in 2014 was attended by 40 (forty) judges.

The fifth and sixth batches were dispatched in 2016. In addition, the organization of

sharia economic training abroad is planned twice a year. In addition, sharia economic

training abroad has also been carried out in Sudan. This activity was carried out at the

Education and Training Center for Judges of the Supreme Court of Sudan, in October 2010.

Likewise, with regard to comparative studies conducted abroad on Islamic economics. The

Supreme Court has conducted comparative studies to various countries, including Morocco,

Sudan, Iran, Saudi Arabia, and others.

The efforts of the Supreme Court continue from time to time, in this framework

marked by the establishment of a team to compile the Compilation of Sharia Economic Law

on October 20, 2006 chaired by Prof. Dr. H. Abdul Manan, SH, S.IP, M.Hum.24 The efforts

of the Supreme Court to support the development of Islamic financial institutions in facing

the free market era did not stop at the limits mentioned above. However, more than that, the

latest effort is to issue Supreme Court Regulation Number 14 of 2016 concerning

Procedures for Settling Sharia Economic Disputes.

Conclusion

The opportunities for Islamic financial institutions in the free market era are

increasingly positive and holistically increasing. Some indications of this opportunity are:

First, the Muslim population is quite large. Second, the products of Islamic financial

institutions are tested and accountable. Third, the regulation of Islamic financial institutions

continues to improve and is in line with legal objectives;

The challenges of Islamic financial institutions in the free market era are basically

greater than the opportunities. Among them are: First, the lack of qualified Islamic

economic experts who master modern economic sciences and Islamic sciences in an

integrative manner. Second, the test of the credibility of the economic and financial system.

Third, the regulatory, legal and policy tools, both on a national and regional scale The

international level is still inadequate. Fourth, there are still limited universities that teach

Islamic economics and the lack of tranining and consulting institutions in this field. Fifth,

the role of government both executive and legislative is still low;

The Supreme Court's efforts to support the development of Islamic financial

institutions in facing the free market era are reflected in its five policies, namely: First,

improving the facilities and infrastructure for resolving sharia economic disputes in

litigation and non-litigation. Second, improving the technical capabilities of human

resources (jurists). Third, establishing formal and material law. Fourth, improve systems and

procedures. Fifth, organizing education and comparative studies of Islamic economics and

Islamic economic law.

Therefore, the following suggestions can be made: a) relevant authorities need to

further socialize the existence and benefits of Islamic financial institutions to academics,

practitioners, and the general public as economic institutions capable of sustaining the

national economy; b) in the framework of strengthening the existence and market

capitalization of Islamic financial institutions, it is necessary to formulate strategic and

fundamental policies in facing the free market so that Islamic financial institutions have a

strong foundation in facing the free market.