The Implementation of the Principle of Profit Sharing in the Musyarakah Financing Contract in Islamic Banks

Islamic banks must conduct their business activities based on sharia principles, one of which is the prohibition of usury. Consequently, they often use the principle of profit sharing in financing contracts. The principle means Islamic banks and their customers have to share their profits and losses, thus a balanced position is created between the parties. One of financing contracts that uses the principle of profit sharing is musyarakah. However, in practice, many Islamic banks do not apply the principle accordingly. The issues to be discussed in this paper are the implementation of the musyarakah financing contract in Islamic banks and whether the profit-sharing ratio complies with sharia principles. This paper concludes that the implementation of the musyarakah financing contract in Islamic banks has met the provisions of the prevailing laws. The contract has also fulfilled its conditions, which are the subject and object of the contract, the agreement of both parties, and the profit-sharing ratio in the form of a percentage. The profit-sharing ratio is also in accordance with the sharia principles regulated in the Fatwa of the National Sharia Council Number 15/DSN-MUI/IX/2000 on Principles of Business Profits Distribution in Islamic Financial Institutions.