THE ADVANTAGES OF CHOOSING THE ISLAMIC FINANCIAL SYSTEM OVER THE CONVENTIONAL FINANCIAL SYSTEM

Abstract

This paper is prepared to fulfill the assignment requirements for students in the Sharia Banking course. Its objective is to enhance a more profound understanding of valid, stable, and ethical financial management procedures within a financial institution based on Islamic law. This paper will also explain the fundamental differences between Islamic and conventional banking management, serving as a guide to identify key points of distinction. This knowledge is crucial preparation for facing waves of financial crises that often stem from systems not based on Sharia, namely systems based on usury (riba) that are oppressive and ultimately detrimental to society, religion, and the nation. Stable and equitable financial management based on Islam is seen as the foundation for sustainable and prosperous national development. By understanding these economic dynamics, it is hoped that students and society can avoid falling into detrimental practices. In the long term, the nation and society will begin to reject the Western economic governance agenda inherited since the colonial era, such as that introduced by the Bank Van Courant (1746) and De Javasche Bank (1828), which introduced the practice of loans with collateral and interest rates. Therefore, this study is prepared to encourage societal wisdom in choosing banking institutions for loan transactions and dealings that are free from usury. Various methods and initiatives will be discussed to achieve this goal.