[Reuters]
Muslims in Indonesia’s Aceh province will be required to patronize Islamic financial services beginning next year, due to a local bylaw that has led several banks to shutter their traditional operations in the Sharia-ruled region, but one Muslim customer is suing to stop the trend.
Lawyer and activist Safaruddin said the closures hurt customers because Islamic banking doesn’t allow interest-bearing loans – unlike at conventional banks – and borrowed money has to be in the form of a trade or business agreement.
“There is not a single provision [in the bylaw] that conventional banks must close. That’s a misperception,” Safaruddin, who is suing three state-owned banks for stopping their traditional services in Aceh, told BenarNews.
A number of large Indonesian banks are closing their conventional banking operations in the country’s strictly Muslim province of Aceh, The Jakarta Post reported. The province has introduced a regulation that all financial institutions have to comply with Islamic law, effective from the beginning of next year, which led to a reconsideration by the banks on doing business there, the report said. The regulations mean that all banks in Aceh are only allowed to offer Shariah banking services, which exclude charging interest on loans, while all banking services are based on participation contracts in one form or another and done.