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THE ROLE OF FINANCIAL SERVICE AUTHORITY (FSA) IN SUPERVISING BAITUL MAAL WAT TAMWIL (BMT)

UNDERGRADUATE THESIS

This undergraduate thesis is submitted as one of the requirements to obtain the

degree of Bachelor of Laws at Faculty of Law

Universitas Muhammadiyah Yogyakarta

Nama : Sri Masitawati

NIM : 20120610283

Faculty : Law

Major : Law Science ( International

Program for Law and Sharia )

Field of Study : Commercial Law

FACULTY OF LAW

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i THE ROLE OF FINANCIAL SERVICE AUTHORITY (FSA) IN

SUPERVISING BAITUL MAAL WAT TAMWIL (BMT) UNDERGRADUATE THESIS

This undergraduate thesis is submitted as one of the requirements to obtain the

degree of Bachelor of Laws at Faculty of Law

Universitas Muhammadiyah Yogyakarta

Nama : Sri Masitawati

NIM : 20120610283

Faculty : Law

Major : Law Science ( International

Program for Law and Sharia )

Field of Study : Commercial Law

FACULTY OF LAW

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ii DECLARATION

I hereby declare that the undergraduate thesis which entitled “The Role of

Financial Service Authority (FSA) in Supervising Baitul Maal wat Tamwil

(BMT)”, its content is my own original work and no portion of my thesis has been copyrighted previously unless properly referenced. On this statement, I am

ready to bear the risk / any sanctions imposed to me in accordance with applicable

regulations, if in the future found a breach of items above, I am willing to accept

the sanctions.

Written by

Name : Sri Masitawati

Student Number : 20120610283

Faculty : Law

Major : International Program for Law and Sharia University : Universitas Muhammadiyah Yogyakarta

Yogyakarta, January 5th, 2017

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iii DEDICATION

This Undergraduate Thesis is dedicated to

My Lord, Allah SWT Prophet Muhammad SAW

My family:

Ayah and Ibu, thanks for everything you both do for me, to always hold me with

the tenderness, to teach me what exactly love means, to live within the warmth of

your heart.

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iv FOREWORD

Assalamu’alaikum wr.wb

Praise to Allah the merciful and generous, always giving His blessings to

facilitate all activities in the process of writing this thesis entitled "The Role of the

Financial Services Authority (FSA) In Supervising Baitul Maal Wat Tamwil

(BMT)".

This thesis was written to qualify graduated at the Faculty of Law in Universitas

Muhammadiyah Yogyakarta. The author is interested in taking this topic in the

hope this research will be useful to increase knowledge, especially regarding

Baitul Maal wat Tamwil (BMT) and also an explanation of the Financial Services Authority (FSA).

This thesis will not be completed without the help and guidance of various parties,

therefore the author would like to thank the people who have helped in completing

this research, while the parties are:

1. The Dean of the Faculty of Law, Universitas Muhammadiyah Yogyakarta,

which has been helpful in providing facilities to ease the process of research in

writing this legal research.

2. Mrs. Fadia Fitrianty, Hj., SH., M. Hum., M.Kn and Mr. H. Muchammad Ichsan

Lc., MAIRKH., Ph.D who has patiently provided guidance to assist in completing

the writing of this legal research.

3. The lecturers were very patient provides useful knowledge and staff employees

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v helped resolve the issues especially regarding the completeness and the

requirements to complete the thesis

4. My family, who have been petrified offered prayers and encouragement to

always try to resolve this legal research.

5. Friends at the Universitas Muhammadiyah Yogyakarta especially batch 2012

who always share sadness and happiness, andencourage each other to reach the

college degree.

The author realizes that the thesis still has a lot of weaknesses. Therefore,

criticism and suggestions are welcomed to enrich the research.

Wassalamu’alaikum wr.wb

Yogyakarta, January 5th, 2017

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6 MOTTO

Never think that any request you have is too much for Allah, He say “BE”, and it

is.

Anonymous

Prayers are invisible but they make impossible things possible. It is ALLAH’s Job

to do the Wonders. Our job is very simple Pray, Believe and Wait.

Anonymous

Live is like a camera, Focus on what’s important. Capture the good times,

Develop from the negatives, and if things don’t work out take another shot.

Anonymous

In order to success, your desire for success should be greater than your fear of

failure.

Bill Cosby

Try not to become a man of success. Rather become a man of value.

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7 TABLE OF CONTENTS

TITLE PAGE ... i

ABSTRACT ... ii

APPROVAL PAGE ... iii

ENDORSEMENT PAGE ... iv

DECLARATION PAGE ... v

DEDICATION ... vi

FOREWORD ... vii

TABLE OF CONTENTS ... 10

LIST OF ABBREVIATIONS ... 12

CHAPTER I INTRODUCTION ... 14

A.Background of Research ... 14

B.Research Problem ... 19

C.Objectives of Research ... 19

D.Benefits of Research... 19

CHAPTER II LITERATURE REVIEW ... 21

A. General Overview of Baitu Maal wat Tamwil (BMT) ... 21

1.Legal Status of BMT ... 24

2.The Characteristic of BMT ... 29

3.The Function of BMT ... 29

4.The Activity of BMT ... 30

B.General Overview of Financial Service Authority (FSA) ... 32

1. Historical Background of Establishment of FSA ... 32

2. The Philosophical Background of the Establishment of FSA ... 33

3. Types of Financial Institution under the Supervising of FSA ... 37

CHAPTER III RESEARCH METHODS ... 39

A.The type of research ... 39

B.Legal material ... 39

C.Method of collecting data ... 40

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8

CHAPTER IV – FINDING AND ANALYSIS ... 42

A.The Role of FSA in Supervising BMT ... 42

1.Supervising of Islamic Financial Cooperation ... 44

2.Setting, Controlling, and Guidance of Microfinance Institution by FSA ... 46

3.Supervising and Development of Microfinance Institution based on the Financial Service Authority Regulations No.14/POJK.05/2014 on Guidance and Supervision of Microfinance Institution ... 48

B.The Effort of FSA to Protect The customer of BMT ... 51

1.Preventive Protection. ... 51

a.Monitoring and Analysis of Customer Protection in Financial Service Sector... 55

b.The Scope of Monitoring and Analysis Customer Protection ... 58

2.Repressive Protection ... 59

a.Customer Protection Inside the Court. ... 60

b.Customer Protection Outside the Court ... 67

CHAPTER V CONCLUSION AND RECOMMENDATION ... 73

A.Conclusions ... 73

B.Recommendation ... 75

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ABSTRACT

Baitul Maal wat Tamwil (BMT) is one of the Islamic Microfinance Institutions which is under supervision of Financial Service Authority (FSA). This research aims at studying the role of the Financial Services Authority (FSA) in supervisingBMT and also the efforts of the FSA to protect the customers of BMT. In this research the author uses the normative legal research method which used the literature study to find the material or data related to the issue. Data therefore collected from reading journals, books, laws or regulations related to the research issue. Primary legal material consists of several laws, regulation, Government Regulation, policies, such as laws related to the Financial Service Authority, microfinance institution, especially for the Islamic Microfinance Institution. This research found that Financial Services Authority (FSA) has the authority to supervise microfinance institutions such as Baitul Maal wat Tamwil (BMT) implemented in different ways, settings, control and guidance of the Microfinance Institution. FSA also make some rules governing consumer protection or the protection of people who use services of microfinance institution. The form of legal protection of BMT consumer is divided into preventive protection and repressive protection. The community has opportunity to raise objection or opinions before the government’s decision received a definitive form. The law should protect the consumer as the subjective conditions that must be created to keep the consumers.

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CHAPTER I INTRODUCTION

A. Background of Research

Baitul Mal wat Tamwil is an institution that is found in the Islamic Government to facilitated financial solution of the State, or a Financial Institution of State which

has duty to receive, store, and distribute financial State in accordance with the Islamic

Sharia.1

Baitul Maal means House of Funds (Rumah Dana) and Baitul Tamwil means House of Business (Rumah Usaha). The term of Baitul Maal is derived from Arabic language which means the House of Property (Rumah Harta) or the State Treasury

(Harta Negara).

BMT is an integrated independent business entity or a Microfinance Institution

which is operated under sharia principles. The purpose of the establishment of BMT

is to improve the quality of economic activities for the welfare of members and

society. BMT can give the capital for helping the member of Society who can use it

to establish any kind of business activities. BMT is businesses that grows and

develops independently and managed by professionals. BMT is initiated for the

welfare of members by raising funds from zakat, donation, charity, endowments and

others.2

1

Mardani, 2012, Aspek Hukum Lembaga Keuangan Syariah Di Indonesia, Jakarta, Kencana, p, 315

2

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Since the establishment of Islamic banks in Indonesia in the 1980s, such as the

Bank Muamalat Indonesia (BMI), day by day there are more in people are interested in this in using the services of Islamic banking. However the operation of Islamic

banks such as BMI has not been fully recognized by small and medium enterprises.

Therefore it appears that the effort to establish a Microfinance Institution that is more

accessible to small communities such as BPR Sharia and BMT.

The establishment of BMT in Indonesia is to fulfill the needs of the Islamic

Community in Indonesia. It is known that Indonesian is the most populated Muslim

country in the world. So Muslims in Indonesia require Financial Institutions based on

Islamic sharia, that’s why Islamic financial is very necessary in Indonesia. The legal

status or legal entity of BMT until now is still unclear, there are many form of BMT

as Cooperation, Foundation, and besides, there are BMT with no Legal Entity.

Some law experts explain that BMT is part of Microfinance Institutions which is

regulated by Law number 1 of 2013. In some articles, it is mentioned that the

existence of these rules is meant in the Microfinance Institutions must be a legal

entity such as a Limited Liability Company or Cooperation and automatically under

the regulation and supervision of the FSA. It is expected that with this legislation the

Microfinance Institutions like BMT in Indonesia will have a clear legal entity and has

obvious supervisory and clear rules. As we know BMT in Indonesia grows up

without clear legal entity and has no particular rules to be followed.3

3

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FSA is the Financial Services Authority or state institutions established by Law

number 21 of 2011 which serves conducting regulatory and supervisory system that is

integrated to the overall activities in the financial services sector. According to Law

No. 21 of 2011, Financial Services Authority is an independent institution and is free

from interference of other parties, which has the functions, duties, and authority,

inspections and investigations on which are referred to in this law.4

At first, the supervision of Financial Institutions such as banks conducted by the

Bank Indonesia (BI) while the financial sector companies of non-banks are regulated

and overseen by the regulatory Bodies of Capital Markets-financial institutions

(Bapepam-LK) but over time the model of monitoring using Bapepam-LK and BI are

less effective to regulate and supervise financial institutions in Indonesia.5 The

government also mandated to establish the financial sector supervisory institutions

like banks in Indonesia which are independent. It is based on law number 23 of 1999

jo. Article 34 of Law No. 3 of 2004 jo. Law No. 6 of 2009.6

In addition, the agency

also has the authority to supervise the Banking Institutions, Insurance Pension Fund,

Capital Ventura, Capital Markets, Corporate Finance, as well as other agencies that

play a role in managing public funds.

The reason to establish the FSA is also due to increasingly complex and diverse

financial products that led to the emergence of a sense of great competition among

4

Indonesia, Law number 21 of 2011 of Financial Service Institution

5

KR Sinaga, Otoritas Jasa Keuangan Sebagai Lembaga Yang IndependenAccessed on January, at 09:00 p.m., www.repository.usu.ac.id/bitstream/123456789/.../3/Chapter%20II.pdf

6

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Financial Services Company which later lead to many frauds against the laws and

procedures. It is necessary to institute a more competent and independent institution

to oversee it. Another reason for the government is that Bank Indonesia, as the central

bank has failed in its function as a bank that regulate and supervise the financial

sector, that is why then FSA replaces Bank Indonesia in the regulation and

supervision of banks and non-bank institution, and also protects the Consumer of

Financial Services Industry.

In article 4 of Law No. 21 of 2011 explain the objectives of the FSA (Financial

Services Authority) are;7

FSA shall be established in order to the overall activities within the sector of financial services, is:

(1) Well organized, fair, transparent, and accountable.

(2) Capable to realize financial system of which grow sustainably and stable; and

(3) Capable of protect the interests of Consumers and Community.

With these objectives, the FSA is expected to support interests of the financial

service sectors and able to maintain the health of financial service institution in

Indonesia. Thus it is able to maintain the interests of consumers and the community

that may affect the financial stability of the state and national competitiveness.8

The establishment of a Supervisory Institution also aims to create flexibility and

efficiency of the regulation and accountability. The presence of various supervisory

institutions potentially creates sectorial arrogance and diversion of responsibility so

7

Indonesia, Law No. 21 of 2011 on Financial Service Authority

8

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that the rule implementation is ineffective. Moreover duplication making process and

data processing have caused inefficient rule implementation of the regulatory

institution. Disbursement effect (division of authority/division error) can also occur

if there are several financial supervisory institutions.9

The FSA is a new organization that is designed to perform strict supervision

on Financial Institutions such as banks, Capital Markets, Mutual Funds, Financial

Institutions, Retirement, and Insurance.

The main purposes of the establishment of the FSA are to;10

a. Improve and maintain public confidence in field of financial services.

b. Enforce laws and regulations in field of financial services.

c. Increase public understanding of financial service sector.

d. Protect the interests of consumers and financial service.

Another reason establishment of the FSA is due to financial crisis of 1996-1997 that

had a major impact on the finances in Indonesia, especially in banking sector. There

were 16 banks in Indonesia which were closed and it caused rush. This incident

became one of the causes of the formation of the FSA. Thus the people expect that

the establishment of FSA can prevent the crisis.11

Meanwhile, according to Article 5-6 of Law No. 21 of 2011, the function of

Authority for the financial services regulatory system is to organize and integrate

supervision of the overall activities in the financial services sector.

9

Ibid. p. 22

10

Indonesia, draft of the Law on Financial Service Authority, p. 1-2

11

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Among regulation and supervision duties are given in term of :12

a. Activity of financial services in the sector of banking.

b. Activity in the financial services sector of the Capital Markets; and

c. Activity of financial services report in the Sector of Insurance, Pension Funds, Financial Institution, and Other Financial Services.

From these explanations it be concluded that BMT is included in the

Financial Institutions and other financial services that are also subject to and comply

with the regulation and supervision performed by the FSA.

B. Research Problem :

1. What is the role of the Financial Service Authority (FSA) in supervising

Baitul Maal wat Tamwil (BMT)?

2. What are the efforts of the Financial Service Authority (FSA) to protect

the customer of Baitul Maal wat Tamwil (BMT)?

C. The Objectives of Research

1. To find out the role of Financial Service Authority (FSA) in

supervising Baitul Maal wat Tamwil (BMT)

2. To understand the effort of Financial Service Authority (FSA) to

protect the customer of Baitul Maal wat Tamwil (BMT)

D. The Benefits of Research

1. Theoretical Benefit

12

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This research is expected to increase knowledge and information on the role of

financial and related services authority in overseeing the financial services industry

such as BMT, and also to contribute to the science of law, especially commercial

law in understanding the rules of the FSA and the BMT as enactment Law number

21 of 2011 on the financial services authority and the Law No. 1 of 2013 on MFIs

(Microfinance Institutions).

2. Practical Benefits

Hopefully this research can increase knowledge and help people in solving the

problems related to the financial services authority and BMT. Moreover, it is hoped

that this research clarifies the role of the Financial Services Authority (FSA) in

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CHAPTER II LITERATURE REVIEW

A. General Overview of BMT

Baitul Maal wat Tamwil is an institution that has two terms Baitul Maal and Baitul Tamwil. Baitul Maal is referring to the collective management and disbursement of the nonprofit, like charity, donation, and alms. The Baitul Tamwil, on

the other hand, a collection of business and commercial distribution of funds. The

effort is an integrated part of the BMT activities in supporting small economic

activities based on Islamic sharia.1

The purpose of this institution is to provide financial services to the parties

who are not covered by financial services such as Islamic bank, Conventional bank,

or Bank Perkreditan Rakyat Sharia (BPR). The operational principle which is done in BMT is similar to Islamic Bank, such as the principle of sharing, buying and selling,

ijara, and deposit. However, BMT has its own market share; they are a small

community that is not affordable banking services or small businesses (Pelaku Usaha Kecil).2

BMT is a mosque-based economic development as a medium for the

prosperity of the mosque. The member and partner of BMT is society or people live

1

Mardani, 2012, Aspek Hukum Lembaga Keuangan Syariah di Indonesia, Jakarta, kencana, p,316 2

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around the mosque. Whether individuals or institutions, along the path of residency

and identity.3

The form of BMT is corporation and should be based on the principles

of Islamic sharia.4

BMT's vision is to become a healthy financial institution,

independent, and strong which increases the quality of members worship in a way

that is able to act as a servant of Allah, which can lighten the burden of life of

members in particular and society in general.

The mission of BMT is to help the community or its members to be free

from the shackles of debts, poverty and the economy that leads to riba, empowerment movement in improving the capitalists in real economic activities and institutions

towards the economic order that is prosperous, advanced and justice movement to

build civil society structures, progressive and prosperous, based on the sharia and the

pleasure of Allah swt.5

With these vision and mission BMT has several roles in the community such as:6

1. Keep the community of practice of economic base on sharia principles.

Socialization actively with the society introduces the importance of the

economic Islam. This can be done by training in Islamic transaction,

banning in weighing, promoting honesty with consumers, and so on.

3

Karnaen A. Perwataatmadja, 1994, Membumikan Ekonomi Islam di Indonesia, Depok, Usaha Kami, p. 17

4

Mardani, 2012, Aspek Hukum Lembaga Keuangan Syariah di Indonesia, Jakarta, Kencana, p. 316. 5

Andri Seomitra, 2010, Bank dan Lembaga Keuangan. Ed. 2, Jakarta, Kencana, p. 452-453 6

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2. Conducting coaching and financing the small business. BMT should keep

the function as microfinance institutions, such as coaching, counseling and

supervision to the work of customers and the general public in economic

sector.

3. Waive the society from dependence of creditor (Debt Collector). As we

know until now the Indonesian society still depends on creditors. Because

the creditors (Debt Collector) is able to fulfill the needs of the society

immediately. So BMT should be able to serve the people, for example it

always has the available funds, simple bureaucratic procedure and so

forth.

4. Maintain the economic justice with equitable distribution. BMT directly

faces the society that is why BMT must be in good performance, good

attitude to serve the society, to carry out the evaluation to ensure equal

distribution priorities that must be considered. And the issue of financing,

BMT must consider the customer in groups and types of financing.

In order to realize its objectives, BMT should be consistent with the role by

maintaining the values of sharia in operation; improve guidance and development of

micro enterprises with Islamic principles; improve professionalism; and help

difficulties in credit financing.7

7

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The basic principle of the establishment of BMT, are as follows:8

1. Belief and devotion to Allah swt., by implementing the principles of Sharia

and Islamic Muamalah in society.

2. Integration (Kaffah) is spiritual values serve to direct and drive the dynamic progressive moral ethics, fair and good being.

3. Kinship

4. Togetherness

5. Independence

6. Professionalism

7.Istiqomah, consistent, continuity/sustainable without stopping and without despair. After reaching a stage, progress to the next stage, and only would

please of Allah swt.

1. Legal Status of BMT

BMT current legal status is still unclear; there are some BMT in the form of

Cooperative, Foundations, and others do not have legal entity in general they are

using KSM status. And some them still has not legal entity. So, the legal status BMT

can be classified into:

8

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a. BMT with the legal status of the Cooperative. BMT with the form of

cooperative in activities to collect funds from the public and also channeled

funds to society. The activity refers to :

1). Act No. 25 of 1992 on Cooperative and PP No. 9 of 1995 on the

implementation of the activities of savings and loan cooperatives, these laws

have been amended by law number 17 of 2012.

2). Decision of the State Minister of Cooperatives and SMEs number

91/Kep/M.KUKM/IX/2004 on the implementation guidelines of Cooperative

business activities and Islamic Financial Services.

b. BMT with legal status of foundations. It is stipulated in Law No. 28 of 2004

on the foundation. Although the use of the legal status of the Foundation

(Yayasan), however, is not in accordance with guidelines issued by the book PINBUK (Business Incubation Center Small Business).

c. The BMT without a legal entity. In general, BMT will be established in the

form of KSM (Kelompok Swadaya Masyarakat) or NGO (Non-Governmental Organization/LSM).

d. As the Microfinance Institutions, according to Law No. 1 of 2013 a

Microfinance Institution is a financial institution that is specifically

established to provide business development services and community

empowerment, through giving loan or financing of micro enterprises of

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consultant of its member or it was established for non-profit purposes.

Manager of savings, as well as the provision of consulting services business

development that is not solely for profit.9

In the other words it can said that

Microfinance is a financial sector activity raising funds and providing loans or

financing micro scale with a simple procedure to the poor and/or low

income.10

Microfinance institutions in Indonesia, where initially started from the

establishment of the Credit Bureau of the village, which contains the village saving

(Lumbung Desa), which was initiated in 1897 by the Group of Governmental and

Village Bank (Kelompok Swadaya Masyarakat dan Bank Desa). Rural Credit Agency

(Bank Kredit Desa) is a Microfinance Institution that was established by the villagers to provide credit for villagers who need capital for business.11

In 1905 the Rural Banks extended their services beyond the agriculture. In

1929, the Dutch East Indies government published the Staatblad No. 1929 137 on the

establishment of Rural Credit Agency (BKD/Bank Kredit Desa) to deal with rural

credit in Java and Bali. After the independence of the Indonesia, government

encouraged the establishment of a "Bank Market" as well as Micro-Institutions

established by local governments, such as the Institute and the Rural Credit Fund

9

Article 1 Law number 1 of 2013 about Microfinance Institution

10

I Gde Kajeng Baskoro, Lembaga Keuangan Mikro di Indonesia, Jurnal Buletin Studi Ekonomi, Vol.18, No. 2, August 2013,www.eprints.walisongo.ac.id., 08.30. p. 155

11

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(Lembaga Dana dan Kredit Pedesaan) in West Java, Credit Agency District in Central Java etc.12

Then there is also Bank Rakyat Indonesia (BRI Unit Desa) which is appointed

to carry out the task of mentoring, coaching and supervising BKD, ranging from how

to assess prospective borrowers, types of installment loans, the amount of member

loans, the administration of savings loans, cash money management, provision of

working capital, regulate how the interpreter payroll administration, etc., as the result

BKD can boost the rural economy. At the time BRI Unit Desa roles was influenced by

government support especially in BIMAS (Guiding Society Program).13

In its development, of the existence of BKD was very demanded by

community in in villages. That is why some local governments were competing in

establishing Microfinance Institution it. In Indonesia Central Bank (BI) has

categorized Microfinance in to two type; Microfinance Institution Bank and

Microfinance Institution Non-Bank. MFIs Bank consists of BRI Unit Desa, and Rural

Credit Agency (BKD). While Non-bank MFIs consists of savings and credit

Cooperatives (KSP), a Rural Credit Fund Institutions, Baitul Maal wat Tamwil (BMT), Non-governmental Organizations (NGOs), KSM (Kelompok Swadaya

Masyarakat), etc.14 Therefore, people develop Islamic Microfinancial Institutions that

12

I Gde Kajeng Baskoro, op.cit. 13

I Gde Kajeng Baskoro, op.cit. 14

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can interact with the people of the village with ease can finance small businesses

namely Baitul Maal wat Tamwil.15

BMT is a business organization that also plays social role. As a business

organization, BMT further expand its business in the financial sector which is a

savings and loan. This business such as banking business, namely collecting funds of

members and prospective members/customers and channeling them to the lawful

(Halal) economic sector and profitable.16 BMT has special characteristics that are different from other Financial Institutions. This is caused by its operating system

adapting the Islamic Banking System. This special characteristics make the legal

position of BMT in the danger condition as there has no specific rules the special

rules to regulate the BMT in Indonesia.17

As one of the Financial Institutions BMT needs to have clear legal entities

that do not harm the customer, it also makes BMT choose the legal status of

Cooperatives. BMT is Islamic Microfinance Institutions that can be in the form of

Islamic Financial Services Cooperatives (KJKS). This is due to BMT business

activities in the sector of finance, investment and saving, and the corresponding profit

sharing system (sharia). In the decision of the Ministry of Cooperatives and SMEs No

15

Heri Sudarsono, 2004, Bank dan Lembaga keuangan syariah; Deskripsi dan Ilustrasi, Yogyakarta :

Ekosinia, p. 97 16

Muhammad Ridwan, 2003, Management Bank Syariah Yogyakarta, UPP AMP YKPN, p.126 17

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91/Kep./M.KUKM/IX/2004 on the guidelines of KJKS activities, the Islamic rules

for financial services needs to be further developed.18

According to Article 1 of the Decree of the State Minister of Cooperatives and Small

and Medium-Sized Republic Indonesia No 91/Kep/M.KUKM/XI/2004 are regarding

the user deploy of Cooperative Business Activities of Islamic Financial Services.

Islamic Financial Services Cooperatives or KJKS is a Cooperative engaged in

financing, investment, and savings sharing system (sharia) but there are some other

Islamic Financial services.19

The missions of Cooperative development of Islamic Financial Services/Islamic

Financial Services Unit are:20

1. To increase the economic empowerment program, particularly among micro,

small, medium, and Cooperative with the Islamic system;

2. To encourage economic life sharia activity in micro, small, and medium

enterprises in Indonesia.

3. To increase the enthusiasm and participation of community members in the

activities of Islamic Financial Services.

2.The Characteristics of BMT

18

I Gde Kajeng Baskoro, op.cit. 19

Article 2 The Decision of The Minister of Cooperativesand Small and Medium Enterprises republic of Indonesia Number: 91/M.KUKM/XI/2004 concerning The Implementation Guidelines of Cooperative Business Activities of Islamic Financial Services.

20

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Moreover it is important for us to know more the characteristics of BMT as

it is different from other financial services. The characteristics are :21

a. Business-oriented and profit purpose for improving the economic utilization

of most of the members and the environment.

b. Not a social institution but it can be exercised for effective use of charity,

donation, and charity for the welfare of the people.

c. Grew up from the ground by the support of local community participation.

d. Self-dependent as it does not belong to another person, a person, or people

from outside the community.

3. Function of BMT

BMT has several functions:22

a. Collecting and channeling funds. With saving fund in BMT the money can be

enhanced utility, which raised the surplus units (those who have excess funds)

or unit deficit (the party that lack of funds).

b. Liquidity provider

BMT can create a legal tender that can provide the ability to meet the

obligations of an institution or individual.

c. Sources of income.

BMT can create jobs and provide income to their employees.

d. Information source.

21

Andri Soemitra, op.cit.,p.454 22

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BMT inform the public about the risks, benefits and opportunities that exist

in these institutions.

e. Islamic Microfinance Institutions.

BMT as Islamic microfinance institutions to provide financing for small

businesses, micro, medium and cooperative with the excess does not require a

guarantee burdensome for small businesses, micro, medium and cooperative.

4. The Activity of BMT

Based on previous explanations that BMT performs two types of activities;

Baitul Tanwil and Baitulmal. Baitul Tamwil, but these functions then develops into productive ventures and investment in improving the quality of the activities of small

and medium enterprises by encouraging these businesses to save or borrow funds for

capital for their business. Baitulmal itself covers the activities of deposits charity, donation, and alms as well as the consignment or charity which is in accordance with

the mandate given. That is why BMT is very needed by the community, especially

those of small and medium entrepreneurs as there is no other financial institutions

that are able to help directly small and medium scale business.

According to Neni Sri Ismaniyati23

there are many activities developed by

BMT at the moment, among others:

23

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1. Gathering and collecting funds used to finance the efforts of its members. The

first capital of BMT was obtained from a special primary savings of the

founders. Then BMT developed its capital from savings, compulsory savings,

and voluntary savings of members. To increase capital, BMT has coordination

and cooperation with various parties such as state-owned enterprises,

government projects, NGOs, and other organizations.

2. Providing finance support to its members in accordance with the provision of

eligibility made by the management of BMT with its members. As

compensation of these activities, the BMT will get the profit based on mutual

agreement.

3. Playing the role as the manager of the saving and loan business in a

professional manner so that the activities can generate profits for the BMT.

4. Develop businesses in real sector to make profits and support the member

businesses, such as the distribution and marketing, supply of raw materials,

management systems, and others.

B. The General Review of Financial Services Authority 1. Historical Background of Establishment of FSA

Financial Service Authority is a new institution which was established by

government through Law No 21 of 2011. This institution was established for

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services industry including banking and non-banking.24

Detail definition of the FSA

is given in Article 1 of Law No 21 of 2011 about the FSA. It says that Financial

Service Authority, hereinafter referred to as the FSA, is an independent institution

and free from interference by other parties, whose functions, duties, and authority are

regulating, supervising, and investigating referred to in this Act.25

It is seen from the

article 1 above that FSA’s function and roles are very challenging. In fact, it takes a

long time and careful planning to set up an independent financial regulatory body

such as the Financial Services Authority.

Financial service authorities actually were established based on the law

No.23 of 1999 of Bank Indonesia. The Law had demanded the state to establish new

state institutions whose duties to regulate and supervise financial institutions both

banks and non-banks.26

It is mentioned in article 34 that the purpose of FSA is for

serving all activities related to the financial sectors on a regular basis, fair,

transparent, and accountable; it also has authority to promote a financial system that

grows in a sustainable and stable way; it has capability to protect the interests of its

consumers and society. Besides, its Financial Services Authority functions as the

assistance of Indonesian Central Bank or Bank Indonesia in supervising the banking

sector.

24

Septian Widiyanto, 2015, The Role of FSA In Supervising The Health of Commercial Bank”, (unpublished Undergraduate Thesis, Faculty of Law Universitas Muhammadiyah Yogyakarta), Yogyakarta, UMY. p.16.

25

Indonesia, the Law on Financial Service Authority, section 1 (1) 26

(32)

The idea of the establishment of the FSA was actually the result of negotiation

between Central Bank of Indonesia (BI) and the parliament. At the beginning of the

President Habibie era, the government proposed draft to the Bank Indonesia to

provide more independence banks and also to separate the supervision functions of

Bank Indonesia. The idea came from Helmut Schlesinger, the former governor of the

Bundesbank (German Central Bank) who at the time of the preparation of the draft (later became Law number 23 of 1998) acted as Indonesian Central Bank consultant.

He took the pattern of the German Central Bank that does not supervise any banks.27

2. Philosophical Background of FSA Establishment

The philosophical background of FSA establishment was to establish stable

and sustainable condition of national economy by creating great employment

opportunities and equality in all sectors of the economy, as well as providing

equitable welfare to all people in Indonesia. In addition, the judicial background is

Article No 34 of the Law of Bank Indonesia, which mandates the establishment of the

supervisory board for independent financial service sector that covers the banking

supervision, capital market, non-bank financial industry, as well as others agencies

operating in the management of funds. In addition to the philosophical and judicial

background, the establishment of the FSA is also triggered by Indonesian financial

system and its development which are increasingly complex, dynamic, and

27

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interconnected between one financial subsector and others, both in the terms of

products as well as institutional, and complexity of transactions and interactions

between financial institutions as the result of the scheme of ownership of financial

institutions.28

In 1999 the plan will be established an independent agency that would be a

supervisory agency in financial services sector. And the government planned to

establish such supervisory agency no later than December 2002, but until the end of

2002, it had not come true yet. In 2004 the government revised the law of Bank

Indonesia, and finally became the basic of the Law No. 3 of 2004 regarding Bank

Indonesia. As described in article 34 paragraphs 1 and 2, supervisory agency is

decided as financial services authority.29

Amendment in the formulation of an agreed transfer of power from Bank

Indonesia's banking industry to the Financial Services Authority can still be extended

no later than the end of 2010. In 2010 deadline formation of Financial Services

Authorities again was neglected; until 2010 the establishment of the FSA had not

been officially launched. The bill on the FSA which shall be provided at the plenary

meeting of 17 December 2010 found it’s deadlocked as the government and the

28

Research Cooperation Team FEB UGM-(Fakultas Ekonomi dan Bisnis – Universitas Gajah Mada) and FE-UI (Fakultas Ekonomi – Universitas Indonesia), Alternatife Struktur OJK (otoritas Jasa Keuangan) yang optimum : kajian Akademik, 10 April 2016, www.perpustakaan.depkeu.go.id/ 12.01.p.m.

29

(34)

House of Representatives (DPR) had not yet found an agreement on the structure and

procedures for the formation of the Board of Commissioners.

In 2011 the leader of DPR, Priyo Budi Santoso finally approved the Draft of

Law of Financial Services Authority in the DPR plenary session on Thursday 27

October 2011 and the meeting was decided to set up a committee to select

Commissioner Council of Financial Services Authority, and such committees shall be

formed in 2012.

Provisions of Article 8 of Law about FSA are:30

“To implement the assignment of the task of regulation referred to in Article 6, the FSA has the authority to;

a. Establish the Implementing regulation of this law;

b. Establish the law and regulation legislation on the sector of financial service;

c. Establish regulation and decree of FSA;

d. Establishing regulation on the supervision in the sector of financial service;

e. Establishing the policy on the assignment implementation of FSA;

f. Establishing regulation on establishment procedures the written instruction for Financial Service Institution and certain party; g. Establishing regulation on establishment the statutory manager

in the Financial Service Institution;

h. Establishing organization structure and infrastructure, as well managing, maintaining, and administering on the wealth and liability; and

i. Establishing regulation on the imposition procedures of sanction in the accordance with the provision of the law and regulation in the sector financial service.”

And also in further provisions set forth in article 9 of Law FSA are:31

30

(35)

“To implement the assignment of supervision as set forth in Article 6 above,

FSA has authority on:

a. Establishing the operational supervision policy toward the activity of financial service;

b. Supervise the implementation of supervisory duties performed by the Chief Executive;

c. Conducting Supervision, examination, investigation, consumer protection, and other measures towards Financial Service Institution, agent, and/or supporting financial service as set forth in the law and regulation in the sector of financial service; d. Providing the written instructions to Financial Service

Institution and/or certain party;

e. Making appointment statutory management;

f. Establishing the utilization of statutory management;

g. Establishing administrative sanction to the parties commit violation against law and regulation on the financial sector; and h. Granting, and/or revoke :

1. Business license;

2. Business license for individual;

3. The effectiveness of registration statement; 4. Registered certificate ;

5. Approval to perform business activity; 6. Legislation;

7. Approval and the establishment of dissolution; and

8. Other establishment, as set forth in law and regulation in the sector of financial service.”

The financial system plays an important role in the company because the

financial system has faction to allocate funds from the financial surplus to the

financial deficit. If the financial system is suitable and does not function efficiently,

the allocation will not run properly. As a result, it can, it can hamper economic

growth. Experience shows that suitable financial system especially if resulted in the

31

(36)

crisis requires very high cost efforts to rescue.32 As we know, the financial system can

be defined as a collection of institution, markets, provisions of legislation,

regulations, and techniques in which the securities are traded, the interest rate is set

and the financial services are produced and offered to all parts of the world. The

banking system is a system that concerns about banks, covers institution, business

activities, as well as the manner and process of carrying out business activities.33

3. The Types of Financial Institution Under the Supervising of FSA

In Indonesia there are two types of Financial Institutions namely banks and

non-bank. Banks in Indonesia includes Commercial Bank, Rural Bank (Bank

Perkreditan Rakyat), commercial and Islamic Rural Bank. Non-Bank Financial

Institutions include Insurance, Capital Markets, Mortgage Companies, Pension

Funds, Cooperatives, and Underwriting Financial Institutions. Companies that can be

categorized into financial institutions include the lessor, consumer finance companies,

and Ventura capital firms. Many Financial Institutions which conduct their duties to

supervise Bank or Non-Bank Institution only add more complex control system, and

the FSA is seen as a proper state agency to supervise the entire Financial Institutions.

So, the whole system of supervising Bank and Non-Bank is simpler and more

proper. The position of the FSA in the financial system in Indonesia is as the protector

32

Research Cooperation Team FEB UGM-(Fakultas Ekonomi dan Bisnis – Universitas Gajah Mada) and FE-UI (Fakultas Ekonomi – Universitas Indonesia), Alternatife Struktur OJK (otoritas Jasa Keuangan) yang optimum : kajian Akademik, 6 February 2016, www.perpustakaan.depkeu.go.id/ 12.01 P.M, p.1

33

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of financial service users in Indonesia, the protector of consumers, regulators and

supervisors of financial institutions in Indonesia.34

The establishment of monitoring

system is one of the solutions of the problems mentioned earlier. The unification of

the regulatory agency is considered to reduce the existing abuse of dualism

supervision. Moreover, the flow becomes concentrated so the comprehensive

monitoring information of financial institution can be achieved.35

34

Septian Widiyanto, op.cit p. 21. 35

(38)

CHAPTER III

RESEARCH METHODOLOGY

A. The Type of Research

This research uses normative legal research in which the researcher

conducts the literature study to find the material or data related to the issue. The data

were collected from reading journals, books, laws or regulations related to the

research issue.

B. Legal Materials

Legal materials are taken from the learning literatures such as:

Primary legal material consists of several laws, regulation, Government Regulation,

policies, as follows:

a. Law number 21 of 2011 about Financial Service Authority

b. Law number 3 of 2004 jo. Law number 6 of 2009 about Bank Indonesia.

c. Law number 1 of 2013 about Micro Finance Institution

d. Regulation of Financial Services Authority number 23/POJK.07/2013 on

consumer protection in financial services sector.

e. Circular Letter of the Board of Commissioners number 2/SEDK.07/2015 on

Guidelines for Monitoring and Analysis of Consumer Protection in the

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f. Financial Services Authority Regulation No. 1/POJK.07/2013 on consumer

protection financial services sector.

g. Circular Letter of Financial Service Authority number 2/SEOJK.07/2014 on

Service and Settlement of Consumer Complaints on Financial Services

Business

h. Decision of the Minister of Cooperatives and Small and Medium Enterprises

Republic of Indonesia Number: 91/M.KUKM/XI/2004 Concerning the

Implementation Guidelines of Cooperative Business Activities of Islamic

Financial Service.

i. Regulation of Financial Service Authority No. 1/POJK.07/2013 on Customer

Protection Financial Service Sector.

j. Regulation of Financial Service Authority Number 14/POJK.05/2014 on

Guidance and Supervision Microfinance Institution.

k. Civil code

l. Commercial code.

Secondary legal material of this research comprises of several research findings, like

books, journals, draft of law, magazine, internet, etc.

C. Method of Collecting Data

The data of the research were collected through library research or literature

(40)

conclusion from related documents namely regulations, laws books, legal journals,

and others related to the main problem as the object of this research.1

D. Research Approach

The researcher used the Statute Approach or regulation Approach. Statute

Approach or regulation Approach is an approach used to understand particular issue

by using interpreting some regulations, laws, and policies as the basis of the research

analysis and try to make conclusion toward the research question.

1

(41)

CHAPTER IV

FINDINGS AND ANALYSIS

A. The Role of Financial Service Authority (FSA) in Supervising Baitul Maal wat Tamwil (BMT)

BMT or Baitul Maal wat tamwil is one of the Microfinance Institutions which

applies the sharia principles. BMT using the sharing profit principle and has the

purpose to develop Micro-Enterprise Businesses and business of the poor or the

people who are unable to loan money from the bank or other financial institution

because they could not meet several criteria or requirements to obtain funds.

Unfortunately, the development of BMT was not followed by formulation of the rules

and the clear legal basis. BMT has unique characteristics when compared with other

Financial Institutions. Because it has a mission not only for profit/commercial

mission (Baitut Tamwil) but also for social mission (Baitul Maal).

Therefore, BMT can be regarded as new type of Microfinance Institution

which is different from other Microfinance Institutions. Some of the form of BMT

has the legal form of a Cooperative, but it is still a choice, not a requirement. The

(42)

as their legal entities. Therefore BMT obey the Cooperative rules, namely Law No.

25 of 1992 on Cooperatives which has been amended into Law no.17 of 2012.1

There was also the Ministry Decree No. 91/KEP/M.KUKM/IX/2004 on

Guidelines for Implementation of Business Activities of Sharia Financial Service

Cooperative (KJKS). This regulation elaborates in the Implementation Guidelines

(JUKLAK) and Technical Instructions (JUKNIS) as well as Standard Operating

Procedures (SOP) and Standard Operational Management (SOM) which is obey the

Ministry Degree No. 352/PER/M.KUKM/X/2007 on Guidelines Management of

Cooperative Operational Standards of Islamic Financial Services and Islamic

Financial Services Business Unit. Since there is law number 1 of 2013 on Micro

Finance Institutions automatically legal status of BMT become one of the problems

that burdens itself.2

The existing of BMT today is mostly in the form of Cooperative with small

and medium scale enterprises, and include the business area such as several

Cities/Districts, and even cross the Province. Because of the regulation of law No 1 of

2013 the scope of its business are a little bit restricted, as declared in paragraph 6 of

the Law number 1 of 2013 on Microfinance Institutions that the territory of the

business of BMT is in a Rural Area/Village, District, or County/City. If it wants to

expand its business to other cities or districts, BMT should be transformed into a

1

Novita Dewi Masyitho, Kajian Rechtodogmatiek Undanh-Undang Nomor 1 Tahun 2013 Tentang Lembaga Keuangan Mikro (LKM) Atas Status Badan Hukum dan Pengawasa Baitul Maal wat Tamwil, access in www.eprints.walisongo.ac.id/3846/1/Novita%20, on 15 july 2016, 5:15 p.m., p 25 2

(43)

bank, like the regulation mention in the article 27 of law No. 1 of 2013 on the

Microfinance Institution, that Microfinance Institution /BMT has to transform into a

bank3 if the following conditions are fulfilled;

a. The business activities of Microfinance Institution more than in one

district or city in the region of that Microfinance Institution establish.

b. Microfinance institution has already fulfilled the requirement of the

regulation of Financial Service Authority.

In this case it can be concluded that BMT owners or members may expand their

business into other Districts/Cities, which has authority over the supervision of the

Ministry of Cooperatives and Small and Medium Enterprises into the Financial

Services Authority.

1. Supervision of Islamic Financial Cooperation

According to article 1, paragraph (1) regulation of the Minister of

Cooperatives and SMEs No.39/Per/M.KUKM/XII/2007 on Guidelines for

Supervision of Financial Services Cooperatives Sharia and Islamic Financial Services

Unit of Cooperative, the supervision is meant as the activity of coaching, monitoring,

inspection, and assessment on the Cooperative of Sharia Financial Services and Unit

Financial Services. The government in this case the Minister, at the central level and

the officials who are authorized to run the duty of assistance, has full authority to

3

(44)

supervised Cooperative management of Islamic Financial Services and units of

Islamic Financial Services to make sure that such Cooperative has grown properly

and can receive the trust of stakeholders.4

By referring to BMT, its surveillance sharia has some urgency value5. BMT is Islamic

Financial Institutions under the supervisor of the Ministry of the Cooperative, so it

does not have flow control and strict supervision as Bank Sharia or BPRS where there

was Bank Indonesia routinely supervise, request a report and look for loopholes

irregularities made by the bank. Then the existence of DPS at BMT/KJKS attached

indirectly into the institution is meant as internal audit in addition to the coaching

given by the government. In PERKAMEN No. 91 on the JUKLAK (Petunjuk Pelaksanaan). The operational guidelines DPS internal oversight functions mentioned in article 32, which reads:

Sharia Supervisory Board has a duty to supervise the implementation of business

activity Financial Service Cooperative Sharia/Islamic Financial Services unit based

on Islamic principles and report the results to the supervisory authorities. What is

meant by officials here are included in the general provisions are, government rules

stipulated ministers and authorities certify the deed, changes to the constitution and

the dissolution of the Cooperative in the Central, provincial, and district/city.

4

Novita Dewi Masyitho, Kajian Rechtdomatiek Empiric Undang-undang No. 1 tahun 2013 Tentang Lembaga keuangan Mikro (LKM) Atas Status Badan Hukum dan Pengawasan Baitul Maat Wat Tamwil (BMT), accessed on 15 july 2016,www.eprints.walisongo.ac.id, 5:15 p.m

5

(45)

2. Settings, Controlling, and Guidance of Microfinance Institution by Financial Service Authority

The Setting, controlling, and guidance of Microfinance Institution were

conducted by the Financial Services Authority. In supervise Microfinance

Institutions, Financial Services Authorities cooperate with the Ministries of

Cooperatives and Ministry of Internal Affairs as described in Article 28 of Law No. 1

of 2013. The guidance and supervision were delegated or represented by local

government District/City. According to the FSA and the Ministry, when the Local

government District/City is not ready for the task as a representative of the FSA and

the Ministry in regulating and supervising microfinance institutions in the region.

Then the FSA will makes cooperation with the ministry of cooperatives and the

Ministry of Internal Affairs to appoint other agencies or another party as a delegate to

carry out supervision and guidance of microfinance institutions. MFI are also

required to submit financial report to the Financial Services Authority every four

months, or such other reports stipulated in the regulations of the Financial Services

Authority. Besides microfinance institution also must publish a financial report as one

of the principles of openness of Microfinance Institutions.6

Provisions of Article 8 of Law about FSA are:7

6

Indonesia, POJK number 14/POJK.05/2014 of Guidance and Supervision Microfinance Institution. 7

(46)

“To implement the assignment of the task of regulation referred to in Article 6, the FSA has the authority to;

a. Establishing the Implementing regulation of this law;

b. Establishing the law and regulation legislation on the sector of financial service;

c. Establishing regulation and decree of FSA;

d. Establishing regulation on the supervision in the sector of financial service;

e. Establishing the policy on the assignment implementation of FSA; f. Establishing regulation on establishment procedures the written

instruction for Financial Service Institution and certain party;

g. Establishing regulation on establishment the statutory manager in the Financial Service Institution;

h. Establishing organization structure and infrastructure, as well managing, maintaining, and administering on the wealth and liability; and

i. Establishing regulation on the imposition procedures of sanction in the accordance with the provision of the law and regulation in the

sector financial service.”

And also in further provisions are set forth in article 9 of Law FSA are:8

“To implement the assignment of supervision as set forth in Article 6 above, FSA has

authority on:

a. Establishing the operational supervision policy toward the activity of financial service;

b. Supervising the implementation of supervisory duties performed by the Chief Executive;

c. Conducting Supervision, examination, investigation, consumer protection, and other measures towards Financial Service Institution, agent, and/or supporting financial service as set forth in the law and regulation in the sector of financial service;

d. Providing the written instructions to Financial Service institution and/or certain party;

e. Making appointment statutory management;

8

(47)

f. Establishing the utilization of statutory management;

g. Establishing administrative sanction to the parties commit violation against law and regulation on the financial sector; and

h. Granting, and/or revoke : Business license; Business license for individual; The effectiveness of registration statement; Registered certificate; Approval to perform business activity; Legislation; Approval and the establishment of dissolution; and Other establishment, as set forth in law and regulation in the sector of

financial service.”

3. Supervision and Development of Microfinance Institutions are based on Financial Services Authority Regulations No. 14/POJK.05/2014 on Guidance and Supervision of Microfinance Institution

This law explain in more detail on how the guidance and supervision of

Microfinance Institutions by the financial services authority.

a. Guidance and supervision of MFIs conducted by the FSA

In Chapter II Article 2 mentions:

(1) Guidance, Regulation, and Supervision of MFIs are conducted by the FSA

(2) In conducting the guidance and supervision, the FSA conduct coordination with the ministry which organizes the Cooperative and the Cooperative and the Interior Ministry.

(3) Guidance and supervision as referred to in paragraph (1) delegated to the district/city

(4) In the event that the district governments/city is not ready, the FSA may delegate the guidance and supervision to another party designated.

Chapter 3 of this rule also explains that in order to accomplish their functions and duties of guidance and supervision of MFIs, local government in district or city preparing human resources and infrastructure. Preparations include:

(48)

b. Assign employees appointed for training organized by the FSA c. Prepare means of operational Support and Supervision.

Besides supervision is assigned to the local government district/city includes several things, namely:

a. Acceptance of the financial statements and impute data into the application system

b. Conduct analysis of MFI’s financial statements c. Receive and analyze another report

d. Do the follow up on other reports

e. Prepare a work plan examinations, investigations, and follow up on the results of MFIs

f. Impose of administrative sanctions to MFIs in addition to revoke the business license and fined

g. Undertake measures appropriate response to MFIs experiencing liquidity problems and solvency were harmful to business continuity

b. Examination Authority MFIs by financial services

(1) In the framework of the implementation of the function of supervision, the FSA conduct an examination of the MFI

(2) The examination of the MFI as referred to in paragraph (1) is delegated to the district/city in region where MFI operates or other parties appointed by the FSA. (3) If necessary, the FSA can make a direct examination of the MFI either individually or jointly with local government district/city or other parties appointed

(4) The examination aims to:

a. Obtain assurance regarding the actual condition of MFIs.

b. Examine the suitability of conditions MFIs with legislation and practices regarding business healthy MFIs; and

(49)

(1) The examination of the MFI is done by:

a. Upon analysis of the periodic reports of MFIs should be assumed that the implementation of MFI's business activities intended to deviate from the legislation in the field of MFIs that could pose risks which harmful to MFI business continuity and/or depositary interests in lending or financing activities and management savings

b. Complaints or reports received from the public there is a presumption that the operation of business activities of MFIs deviate from the provisions of the legislation in force divides MFIs that may cause harm to the public.

(2) The examination as referred to in paragraph (1) shall include an examination of the substance of the periodic reports and compliance with laws and regulations in the field of MFIs.

(3) The examination referred to in Article 8 paragraph (3) shall be done in the case of suspected conditions:

a. The occurrence of both MFI financial abuse by the directors, commissioners and employees of the MFIs.

b. The liquidity and solvency difficulties that lead to dangerous conditions for the sustainability of the MFI's business.

c. There is a deviation from Islamic principles for MFIs in conducting business based on sharia principles.

d. Delinquent loans or financing the purchasing large enough to affect the financial condition of the MFIs

e. The existence of irregularities in the form of a loan or financing fictitious

f. The occurrence of errors in recording and/or accounting calculations that result in financial losses for the MFI;

g. There are conditions beyond the provisions under consideration of the FSA need to be inspected directly by the FSA of the MFI.

MFIs that do not comply with the provisions in article 13 paragraph (1) and

(2) the FSA's regulations, are subject to administrative sanctions in the form of a

written warning, written warning sanction is given 3 times. If the validity period has

(50)

the district/municipality or other parties are appointed by the FSA to revoke the

sanction of a written warning. And if sanctions not heed the warnings by the FSA

MFI shall ask shareholders or meeting of cooperative members.

B. The Effort of the Financial Service Authority (FSA) to Protect the Customer of Baitul Maal wat Tamwil (BMT)

From the theory of Philip M. Hadjo on legal protection, it is found that legal

protection Islamic Microfinance consumers is an important thing to make sure legal

certainty, surety, and give legal protection to customers who have difficulty in

withdrawing funds. To provide legal certainty and legal protection to customers of

legal complaints process through an easy process and the existence of legal

guarantees for customers as well as collateral against funds is unbelievably important

savings for the community.9

1. Preventive Protection

According to the Article 28, Law No. 21 of 2011 explains that the law

has been set, as follows.

"For the purpose of consumer and the community protection, FSA is authorized to perform loss action prevention actions of customers and community, of which includes:

a. Providing information and education to the community regarding on the characteristics of the sector of Financial Service, Service, and Product;

9

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b. Requesting the Financial Services Institutions to stop the activity in the event that such activity potentially adverse to society; and

c. Other measures of which deemed as might be necessary in accordance with the provisions of the law and regulation in the sector of financial services.10

Legal protection is intended to prevent the occurrence of problems or

disputes, the public is given the opportunity to raise objections or opinions before the

government's decision received a definitive form. Based on the theory it can be

understood that the law should protect the customer as the subjective conditions that

must be created for the continued existence of the customer. In order to have the

power of organized both structurally and individually in the process of business

activities. Legal protection for customers preventively can be done to prevent

disputes through government action based on the establishment of relevant norms. To

provide legal certainty and legal protection for the customers of Islamic Microfinance

Institutions, then the customer complaints mechanism must be made easily and

quickly. It is the hope of every community as it adds the trust of people to be the

customers of Islamic Microfinance Institutions.11

As it has been regulated by Bank Indonesia number 16/1/PBI/2014 on

consumer protection payment system services which determines that the customer

suffered a loss financially, where one of them because of the difficulty to withdraw

10

Indonesia,Law No. 21 of 2011 Financial Service Authority 11

(52)

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