Indonesian Islamic institutions between the foundation and endowment laws: a critical legal analysis

BACKGROUND: This research-based paper examined the Indonesian foundation and endowment laws in relation to educational and religious institutions which are managed under foundation legal structure. The institutions examined were: 1) The Pondok Pesantren al-Ansor Foundation in Padangsidimpuan City; 2) The Pesantren Dar al-Ma’arif Education Foundation in South Labuhanbatu Regency; and 3) ​The Masjid Agung Foundation in Medan City. METHODS: Using legal sociology and critical legal analysis, data were collected through field research, document study, and in-depth interviews. The documents studied were laws, books, papers, and other related writings relevant to this research. Interviews were conducted with informants obtained from snowball sampling and key person methods. RESULTS: It was found that in terms of foundation wealth, these institutions can be categorized into three: (1) foundation with founder’s wealth; (2) foundation with endowment wealth; and (3) foundation with both founder’s and endowment wealth. Even though both foundation and endowment legal structures have the same aim of societal welfare, it was found that when they are merged into one legal structure, the foundation becomes more dominant, and there is a risk that the endowment asset’s status become unclear. The asset may be sold or its status may be changed from endowment wealth to foundation wealth. This unclear status may also be caused by conflict of interests among the foundation members and people involved in the foundations. Even when the foundation status is clear, most if not all foundation members violate the rules stipulated by the Foundation Law. The lack of status clarity has caused these institutions to become objects of conflict. CONCLUSIONS: There is a need to position the status of these institutions accurately and it is recommended that the endowment legal structure is used for institutions with endowment wealth.