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121 J.L. Pol'y & Globalization 1 (2022)

handle is hein.journals/jawpglob121 and id is 1 raw text is: Journal of Law, Policy and Globalization wwwdisteia ISSN 2224-3240 (Paper) ISSN 2224-3259 (Online) Vol.121, 2022 ISTE Juridical Review of Credit Collateral within Financial Engineering in Indonesia: An Introduction Try Widiyono Faculty of Law, Jakarta Islamic University Jakarta, Indonesia Abstract Lending is the main business activity in the banking business. However, it should be noted that in addition to promising benefits as the main source of bank income, lending also has a high risk side for banks, namely the risk of failure to return, resulting in losses for the lending bank. To reduce this risk, before extending credit, banks must make a careful assessment of the character, ability, collateral and business prospects of the debtor. Credit collateral has an important role in lending. Creditors collateral is an additional guarantee submitted by a Debtor Customer to a bank in the framework of providing credit or financing facilities based on Sharia Principles. This paper aims to provide an overview of the juridical overview of credit collateral in financial engineering in Indonesia. The research result shows that guarantee is not an absolute requirement. Therefore, it is possible for banks to provide unsecured credit. Guarantee is only one of the conditions that must be met by the customer in addition to other conditions. However, in operational practice, in lending, banks need to require collateral in the form of assets belonging to the debtor. This is based on the premise that lending is a risky banking activity, so in its implementation, banks must pay attention to sound credit principles. Keywords: credit collateral, financial engineering, Indonesian banking system DOI: 10.7176/JLPG/121-01 Publication date:June 30th 2022 1. Introduction In general, the literature suggests that the banking industry has an important role in increasing the economic growth of a country, including in Indonesia. The role of the banking industry in this economy, among others, is to carry out the function of transmission, collect and distribute funds, transform and distribute risks in an economy, and stabilize economic conditions. In developing countries, the existence of the banking industry is becoming increasingly important, considering that a typical developing country is the existence of a saving - investment gap that cannot be covered by the government budget. The involvement of banks in collecting and channeling public funds will greatly assist the economic development process (Simatupang, 2019). In line with the dynamics and development of the banking service industry, as well as to strengthen the banking function as an agent of development, the banking service industry is required to always be able to create and support an increase in economic growth which leads to an increase in the standard of living of the people at large. In addition, the government continues to take steps to improve the quality and quantity of bank credit while maintaining economic stability, especially in facilitating banking credit for the business world, while still adhering to the principles of sound credit (Wahyuni, 2017). Lending is the backbone of banking activities, because the biggest income for banks is from interest income and the proportion of credit. Credit security is a chain of bank activities. This security measure starts when the bank plans to provide credit. In preparing a plan for lending, banks have taken into account various aspects that are accessible to operational capabilities. Regulating the allocation of credit to favorable sectors, which customers are given, and with what amount of the ceiling and so on, are steps to maintain credit security. Banks need to take steps to secure credit because lending is a risky activity (Bambang, 2014). However, it should be noted that in addition to promising benefits as the main source of bank income, lending also has a high risk side for banks, namely a greater risk of failure to return, which causes credit to become problematic which leads to bad credit which results in losses for the bank. credit provider. Credit collateral has an important role in lending. Regarding debt guarantee, in positive law in Indonesia there are various laws and regulations that regulate or are related to debt guarantee or guarantee law. The provisions of the applicable guarantee law provide arrangements that will protect the parties with an interest in the loan money and debt guarantee. The guarantee function in providing bank credit is intended as a guide for interested parties, especially the bank. The bank will feel safe and trust the existence of a guarantee from the debtor or customer because if there is a risk of default in the future, the bank can sell the guarantee as a substitute for the loan that has been given. In connection with the activity of providing bank credit regarding debt collateral, it is called credit guarantee or collateral. Credit guarantees are generally required in a credit extension (Bahsan, 2007). This paper aims to provide an overview of the juridical overview of credit collateral in financial engineering in Indonesia. 1

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