View - ResearchGate

The Paradox Struggle Between Islamic and Conventional Banking Systems
created a overrun effect to the non-bank Islamic financial
intermediaries which also started to offer Islamic financial
products and services under Islamic banking schemes. In its
efforts to establish an Islamic Banking system, Malaysia has
seen the emergence of the Interest Free Banking Scheme
(now replaced with Islamic Banking Scheme, IBS), several
Takaful Companies, savings institutions (examples in Bank
Simpanan Nasional & Bank Rakyat) developmental financial
institutions (examples in Bank Pembangunan dan
Infrastruktur Malaysia and Bank Pertanian),the National
Shariah Advisory Council on Islamic Banking and Takaful
(NSAC), and the second Islamic bank, Bank Muamalat
Malaysia Berhad, Islamic Inter-bank Money Market (IIMM).
Indonesia, on the other hand, is a good as to how exclusive
prerogative afforded to Shariah Courts can be problematic.
Islamic banking in Indonesia started to operate from 1992 by
virtue of the enactment of the Banking Act No. 7/1992 and
amended in 1998, to provide an opportunity to conventional
banks to open an Islamic window. Since that time, the
growth of Islamic banking in Indonesia has been progressing
steady and fast. But the problem was that the jurisdiction of
the civil courts did not extend to Shari’ah matters, within
which Islamic banking disputes apparently came. On the
other hand, the jurisdiction of the religious courts was
limited to Personal law matters. This incongruity was
rectified in February 2006 expanding the jurisdiction of the
Religious courts to cover adjudication of disputes belonging
to Islamic economic matters, including Islamic banking.
There are several clashes between conventional and Islamic
Banking laws. The main focal point of this paper would be
on the clashes created due to application of the common law
or conventional law based laws to resolve the problems in
the Islamic banking system. The impact of this is huge. This
is because, Islamic economics have a different premise from
conventional banking and applying the same legal principles
to resolve disputes for both markets does not work. One
encouraging point is that the Central Bank is focusing on
strengthening the institutional infrastructure, enhancing the
regulatory framework, strengthening the Shariah and legal
190