Beyond Profit-Loss-Sharing Labels: Substantive Risk Sharing and Regulatory Gaps in Indonesian Islamic Banking
DOI:
https://doi.org/10.31958/juris.v25i2.16668Keywords:
Islamic Banking, Profit-Loss Sharing, Substantive Risk Sharing, Musyarakah Mutanaqisah, Risk AllocationAbstract
This study examines the apparent shift from non-profit-loss-sharing (non-PLS) to profit-loss-sharing (PLS)-labelled financing in Indonesian Islamic banking and evaluates whether this shift corresponds to substantive risk sharing between banks and customers. Using normative legal research with statutory, conceptual, and case approaches, the study analyses Islamic banking regulations, DSN-MUI fatwas, AAOIFI Shariah Standards, published sharia economic dispute decisions, and OJK financing statistics. The study finds that OJK statistics for February 2024 identify musyarakah as the largest financing category, seemingly challenging the conventional account of non-PLS dominance. However, this finding reveals a significant substance–label gap: the large share of musyarakah financing is substantially driven by Musyarakah Mutanaqisah (MMQ) home financing, whose periodically reviewed installment structure produces a relatively fixed payment profile, while genuine productive-sector muḍārabah remains marginal. Consequently, the expansion of PLS-labelled financing does not necessarily represent a proportional expansion of substantive risk sharing. The study further finds that the existing regulatory and sharia governance framework does not adequately require banks to disclose or assess the gap between the formal classification of financing contracts and their substantive risk-sharing characteristics at the portfolio level. The tension identified is therefore not the legal validity of murābaḥah, ijārah, or MMQ, but the concentration of financing in contracts whose economic risk profiles may diverge from the substantive risk-sharing rationale of Islamic banking. The study proposes strengthening the Sharia Supervisory Board’s review of contractual substance, introducing portfolio-level disclosure of the PLS-substance ratio, and providing clearer DSN-MUI guidance on risk allocation in force majeure and extreme economic conditions. The study concludes that evaluating Islamic banking performance requires moving beyond formal contractual classification toward greater attention to the substantive distribution of risk between banks and customers.
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