Compliance Is Not Enough: Toward Real Impact in Sharia Economics

Mohammad Nur Rianto Al Arif
(Professor at UIN Syarif Hidayatullah Jakarta,
Secretary General of the Central Board of the Indonesian Lecturers Association,
Board Member of ISEI Jakarta Branch,
Board Member of the Central Board of IAEI)

Islamic economics in Indonesia has grown on a foundation of compliance. Since its early emergence, its main legitimacy has been compliance with the principles of fiqh muamalah: contracts must be valid, free from riba, gharar, and maysir, and supervised by sharia authorities. This compliance is essential, because without a normative foundation, Islamic economics would lose its identity.

However, after more than three decades of development, a fundamental question arises: is sharia compliance enough? Does an Islamic economic system that is contractually compliant automatically create social impact?

This question is relevant amid the reality that the market share of Islamic finance is stagnant, public literacy lags behind, and its impact on reducing inequality remains limited. Islamic economics appears neat within regulatory frameworks, yet it is not fully felt in people’s economic lives.

Here lies the urgency of a paradigm shift: from mere sharia compliance toward sharia impact, or from formal compliance toward real social transformation.

In recent decades, the regulatory infrastructure of Islamic economics in Indonesia has become relatively well established. Fatwa institutions, sharia supervisory boards, accounting standards, and supervisory frameworks have formed an ecosystem that ensures products and financial practices do not deviate from sharia principles. At the industry level, product innovation has developed, ranging from Islamic banking and takaful to Islamic capital markets and sharia fintech.

This compliance provides normative reassurance for Muslims, addressing theological concerns about conducting transactions without falling into riba or prohibited practices. However, compliance that stops at contract validity has limitations.

In practice, many sharia products structurally resemble conventional ones, only with different contracts. Murabaha dominates financing, mirroring the logic of consumer credit. Sharia products become a “halal alternative” for the same economic behavior: consumptive, short-term, and purely profit-oriented.

Procedural compliance risks reducing Islamic economics to “conventional finance with a halal label.” A product may be valid in fiqh but not necessarily socially just. The criticism here is not directed at fiqh itself, but at an implementation orientation that narrowly interprets the objectives of sharia.

The paradox is clear. On one hand, sharia financial assets and instruments are growing. On the other hand, their contribution to productive sectors, MSMEs, and inequality reduction remains relatively small.

Sharia financing is still concentrated in consumer sectors and secured financing. Meanwhile, sectors most in need of capital access—microenterprises, farmers, fishers, and rural economies—are often considered high risk.

At the macro level, Islamic economics is projected as a pillar of social justice. At the micro level, poor communities still face limited access to Islamic financial services. Procedures, requirements, and costs are often unfriendly to vulnerable groups. As a result, they remain trapped in expensive and exploitative informal financing.

This is the failure when compliance is not accompanied by impact orientation. Islamic economics that is formally compliant but fails to address structural problems—unequal access to capital, household economic vulnerability, and low productivity in small sectors—will lose its social relevance. It must become a moral showcase amid an unequal economic reality.

Shifting from compliance to impact requires returning to maqasid al-shariah—the higher objectives of Sharia: protection of religion, life, intellect, lineage, and wealth. In economic terms, maqasid demands protection of people’s wealth, prevention of exploitation, and the creation of public benefit.

This means products and policies should be assessed not only by contract validity but also by how far they create benefit and reduce harm.

The maqasid approach shifts the key question from “Is this product halal in its contract?” to “Does this product create broader benefit?” For example, consumer financing may be contractually valid, but if it leads to debt traps and excessive consumption, is it aligned with the objective of protecting wealth and family welfare? Such questions rarely become part of policy evaluation.

Maqasid also requires siding with vulnerable groups. If Islamic economics fails to reach those who need it most, it has not fulfilled its goal of social justice. Sharia impact means distributive justice, not just procedural compliance.

Sharia's impact does not arise from products alone but from changes in economic behavior. Islamic financial literacy is a key prerequisite. Without adequate understanding, people tend to use sharia products with conventional behavior: consumptive, speculative, and short-term. Islamic economics then fails to build a new ethos in managing wealth.

Ethics in muamalah—honesty, caution in debt, and social responsibility—must be part of literacy. In the digital era, when pay-later schemes and online loans are widespread, financial ethics literacy becomes even more relevant.

Sharia products must not merely offer a “halal alternative” to consumer debt but build a narrative of financial responsibility. Sharia impact means reduced household vulnerability to financial crises, not merely shifting debt platforms from conventional to sharia.

One main solution is reorienting Islamic finance business models from consumptive dominance toward strengthening productive sectors. Profit-sharing financing, business partnerships, and value chain financing must be reinforced. Productive financing indeed carries higher risk and requires intensive assistance. However, this is where greater socio-economic impact lies: job creation, increased productivity, and empowerment of small enterprises.

The state can play a catalytic role through risk-sharing schemes, fiscal incentives, and integration of sharia financing with MSME development policies. Without smart policy intervention, the industry will prefer safe zones such as secured consumer financing with minimal structural impact.

Sharia impact also demands closer integration between commercial Islamic finance and Islamic social finance—zakat, infaq, sadaqah, and waqf. So far, they run in parallel, rarely in systemic synergy. Zakat and charity are often distributed as short-term consumptive assistance. Productive waqf remains limited in scale.

An impact approach requires shifting from charity to empowerment. Islamic social funds can serve as first-loss capital to reduce MSME financing risks, while commercial financing expands business scale. This integration requires institutional design, transparent governance, and measurable impact indicators. Without integration, the vast potential of Islamic social finance will remain fragmented.

Changing orientation from compliance to impact requires governance renewal. Regulators, fatwa institutions, and industry must agree on impact-based performance indicators: how much productive financing is distributed, how many MSMEs move up the value chain, how many jobs are created, and how much household debt vulnerability declines. These indicators must become part of performance evaluation, not just report complements.

Policy incentives must also align with impact goals. If capital regulations and risk management frameworks make productive financing unattractive, the state must provide risk-buffer schemes. Without policy alignment, the discourse on impact will lose to short-term profit logic.

Sharia impact will not emerge from the financial industry alone. It requires an innovation ecosystem: universities, research institutions, sharia fintech startups, MSME communities, and philanthropic institutions. Product innovation must address concrete problems—microfinancing without heavy collateral, digital marketing platforms for halal MSMEs, sharia microinsurance for farmers, and halal industry supply chain financing.

Innovation must also be measured by its impact. Without an impact measurement framework, innovation risks becoming mere product variation, not structural solutions. Impact measurement must be embedded in product design from the beginning.

Shifting from sharia compliance to sharia impact does not negate the importance of compliance. Compliance remains the foundation, but not the final goal. The ultimate goal is maslahah—social justice, inequality reduction, and strengthening the economic capacity of the ummah. Without impact, Islamic economics risks losing its social meaning and becoming a symbolic formality.

The future agenda requires collective courage: regulators willing to realign incentives, industry willing to leave safe zones, preachers and educators willing to ground financial ethics, and society willing to change economic behavior. At that point, Islamic economics can become more than “halal in contract" and truly meaningful socially. From sharia compliance to sharia impact.

This article was published in CNBC Indonesia on Wednesday, February 12, 2026.