Utilizing Musharakah Contracts in Indonesian Islamic Banks for Infrastructure Financing

Abstract

Islamic banks play a pivotal role in providing financial support to various sectors, encompassing both retail and corporate clienteles. The robust expansion of Islamic banking in Indonesia has received substantial backing from the government, manifested in the formulation of Islamic bank roadmaps and the establishment of an Islamic economics masterplan. However, despite the government's emphasis on infrastructure sector development, there has been no significant upswing in financing allocation from Islamic banks, particularly to the contractor segment. This study recognizes that contractors operate with an operational concept akin to musharakah contracts and, therefore, suggests the implementation of musharakah contracts in financing for contractors. To substantiate this proposal, the research leverages observation data extracted from the annual reports of Islamic banks and conducts interviews with key stakeholders within these institutions. The findings of this study underscore the dominance of a single Islamic bank in financing the contractor segment. Interestingly, in previous years, before a merger, one of these Islamic banks also held a dominant position in this sector, while other Islamic banks did not demonstrate any strategic intent to finance this particular segment. This research makes a noteworthy contribution to existing knowledge by shedding light on information asymmetry within the Islamic banking sector and revealing that the construction segment is not a focal point for Islamic banks.

Keywords

• musharakah contracts
• infrastructure contractors
• financing
• islamic banks