The ethics of resolving the nonperforming financing of Mudharaba Contracts in Indonesia Islamic Banks

Abstract

Islamic bank is a bank that implement Islamic principles, including the implementation of policies and activities that should be in accordance with Islamic business ethics. This study discusses about how to behave ethically in solving the non-performing financing in Islamic banks. The non-performing financing has the potential to bring losses to banks. For Islamic banks which provide financing under mudharaba contract, this contract brings more risk to banks. Using a qualitative approach in the form of library research by gathering relevant library resources and abstracting and interpreting the excerpts of references to draw conclusions, this study seeks to explain how to solve non-performing financing from the view of Islamic business ethics. This study uses seven dimensions of Islamic business ethics to describe ethical behavior in resolving nonperforming financing, namely: (1) Unity of God (2) benevolence, (3) justice, (4) sincerity, (5) Equilibrium (6) responsibility and (7) vicegerency. The findings of this study summarize that resolving non-performing financing in Islamic Banks should consider the seven ethical variables to minimize the potential harms or losses. This study will contribute to the body of knowledge on Islamic Bank financing and the practical benefits for the officials and employees in Islamic Banks as there is still limited research regarding this topic. Future studies are encouraged to cover other specific financing activities or products to broaden the knowledge through the findings.