MUI'S STRATEGIC ROLE IN ISLAMIC BANKING: An Overview

Abstract This study explores the strategic role of the Indonesia Ulema Council (MUI) in the development and supervision of Islamic banking in Indonesia, with a focus on the contribution of the National Sharia Council (DSN MUI). MUI functions as a guardian of sharia principles, provides fatwas, conducts supervision, and plays a role in the development of sharia banking products. This study identifies challenges such as legal ambiguity and dualism of authority between the MUI, the Financial Services Authority (OJK), and Bank Indonesia (BI), as well as assessing the effectiveness of the MUI in carrying out its role. The findings show that although MUI contributes significantly to maintaining sharia compliance, these challenges affect its effectiveness. Using a qualitative approach, this review provides practical recommendations including regulatory adjustments to reduce legal ambiguity, increased coordination between MUI, OJK, and BI, improvement of supervision and accreditation mechanisms, and expansion of education and socialization regarding Islamic banking. With the implementation of this recommendation, it is hoped that MUI can strengthen its role in supporting sustainable and harmonious growth of Islamic banking. Abstract This study explores the strategic role of the Indonesia Ulema Council (MUI) in the development and supervision of Islamic banking in Indonesia, with a focus on the contribution of the National Sharia Council (DSN MUI). MUI functions as a guardian of sharia principles, provides fatwas, conducts supervision, and plays a role in the development of sharia banking products. This study identifies challenges such as legal ambiguity and dualism of authority between the MUI, the Financial Services Authority (OJK), and Bank Indonesia (BI), as well as assessing the effectiveness of the MUI in carrying out its role. The findings show that although MUI contributes significantly to maintaining sharia compliance, these challenges affect its effectiveness. Using a qualitative approach, this review provides practical recommendations including regulatory adjustments to reduce legal ambiguity, increased coordination between MUI, OJK, and BI, improvement of supervision and accreditation mechanisms, and expansion of education and socialization regarding Islamic banking. With the implementation of this recommendation, it is hoped that MUI can strengthen its role in supporting sustainable and harmonious growth of Islamic banking.