Economical rights versus God’s rights: criticising of the implementation Shariah economic in Indonesia

Purpose – This study aims to evaluate the impact of Law No. 11 of 2018 on Islamic Financial Institutions in
Aceh, Indonesia. It also aims to understand the balance between the economic rights of individuals under Shariah
law and the broader concept of God’s rights, as interpreted by this legislation. In addition, the research argues
that the implementation of Law No. 11 of 2018 is untimely, with a focus on examining its influence on the
cumulative abnormal return (CAR) of Shariah banks and its slight contribution to the direct economic impact.
Design/methodology/approach – This study adopts a mixed-methods approach that integrates qualitative
and quantitative analyses. The qualitative aspect uses a black-letter law approach for legislative scrutiny,
whereas the quantitative aspect assesses economic indicators and firm performance using an event study
analysis. The study also includes a two-tailed assessment to test hypotheses related to the law’s direct impact
on institutional performance.
Findings – The study reveals that Law No. 11 of 2018 had minimal impact on national-scale corporate
performance and a notable increase in poverty indices in Aceh, indicating a potential misalignment between
the law’s intention and its economic consequences. The results also show the law’s ineffectiveness in
significantly influencing the CAR of Islamic banks, highlighting a clash of norms and a lack of substantial
economic substance in the implementation of Shariah compliance.
Research limitations/implications – This research is geographically and legally focused on Aceh,
Indonesia, with a short-term analysis that may not fully capture the long-term impacts. It primarily considers
the stock price performance of specific institutions for quantitative analysis and identifies potential clashes and
disharmony-in-law implementation from a qualitative perspective.
Practical implications – The findings suggest the need for legal frameworks that better comply Shariah
principles with economic realities. Regional governments should consider modifying policies to balance
religious values and economic objectives.
Social implications – This research highlights the importance of balancing religious obligations with
economic rights, indicating that strict interpretations of religious law can lead to adverse socioeconomic effects.
Originality/value – This study is unique in its comprehensive analysis of the convergence between religious
law and economic rights, offering insights into the challenges faced in implementing Shariah-based economic
policies in diverse economies, such as Indonesia.