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Financing Muhammadiyah: The Early Economic Endeavours of a Muslim Modernist Mass Organization in Indonesia (1920s-1960s)

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02 November 2018 11:52 WIB
Dibaca: 96
Penulis : Gwenaël Njoto-Feillard




Throughout its history, Indonesia’s largest Islamic reformist organization, the Muhammadiyah, has relied on funding based on the gift economy. Using the organization’s archived financial reports from the 1920s to the 1960s–a source that had yet to be exploited–this study  shows how the Muhammadiyah used  different shares of resources (donations, member fees, subsidies, etc.) to finance its organization. In the pre-War period, the Muhammadiyah Central Board became noticeably reliant on colonial subsidies. The reformist organization attempted to emancipate itself from this dependency and develop its own productive sector (businesses, cooperatives, banking, etc.), which  raised various ethical questions  as this socio-religious institution decides to operate lucrative  economic endeavours. Finally, this article argues that the case of Muhammadiyah clearly shows how Indonesian Islam was, quite early on, well-informed of the ethical debates surrounding the idea of ‘Islamic economics’ long before its recent emergence as an economic initiative in the Muslim communities.




Founded in 1912, Muhammadiyah, Indonesia’s largest Muslim modernist organization, originated from the milieu of batik merchants and religious officials in Yogyakarta (Central-Java). In the decades following its creation by K.H. 1 Ahmad Dahlan (1868- 1923), 2 the organization showed an impressive growth—both in terms of membership and in infrastructure—as it came to include thousands of branches, numerous hospitals, universities, schools and orphanages. For its expansion, the Muhammadiyah relied on a variety of modes of ënancing—from membership fees, standard donations, religious alms and endowments to governmental subsidies—but also revenues from cooperatives and businesses. This organizationalcapacity has often been the subject of great pride for Muslim modernists, as it was considered to be the most evident sign of the ‘spirit’ of Islamic reform that would overcome a local traditionalist mentality deemed to be limited to the various legalistic aspects of religious practice (íqh). Early on, reformist Islam’s merchant origins, its organizational capacity and modernist orientation were regarded as akin to the entrepreneurial spirit of ascetic Protestants described by Max Weber. 3


But how successful was the Muhammadiyah in mobilizing these different type of revenues from the gift economy? Did the organization manage to build durable businesses in parallel to its charitable activities? As a religious organization, did it face ethical quandaries in its economic orientations? As French historian Marcel Bonneff remarks, “Muhammadiyah’s history, from the origins in the Kauman 4 to the present day, with its two to three million members and sympathizers, is, itself also, an economic history, a history that emerges only faintly”. 5 Indeed, to this date the only study that has approached, albeit brieìy, the subject is Alëan’s monograph published in 1989 on the ‘political behaviour’ of Muhammadiyah during colonial times. 6 This paper proposes, therefore, to shed light on this ‘material history’ of Muhammadiyah from the 1920s to the 1960s.


The period chosen for this study is considered essential for a number of reasons. First, although the Muhammadiyah was created in the early 1910s, it was only in the 1920s that K.H. Ahmad Dahlan’s organization really started to expand throughout Java and in the outer-islands. In the 1930s, as the effects of the 1929 Great Depression came to be felt in the Dutch Indies, a renewed awareness of the importance of economic matters appeared within Muhammadiyah ranks. After the 1940s—andthe inevitable economic downturn caused by almost a decade of the war—new opportunities seemed to appear for indigenous enterprise as the country was experiencing a form of liberal multi-party democracy in the 1950s. In the 1960s, however, the economy suff ered from political mismanagement, and this may have been one of the reasons why Muhammadiyah’s economic initiatives waned significantly. It was only at the end of the 1990s, and through the 2000s, that the reformist organization would again develop businesses on a large-scale. That period will be the subject of a subsequent article.


For the period from the 1920s to the 1960s, the archives of the organization contain a significant set of data that is yet to be exploited. This will be done through the study of the reports of its general assemblies (muktamar), as well as its offi cial magazine, Suara Muhammadiyah and the Batavia branch’s journal, Pantjaran ‘Amal. This branch was in charge of Muhammadiyah’s economic aff airs.


Such a study does not have the ambition of surveying exhaustively the economic practices of the thousands of branches that constitute the organization. Rather, it focuses on the economic initiatives of the Muhammadiyah leadership, or Central Board (Pimpinan Pusat), in Yogyakarta and Jakarta within two main fields: the ‘gift economy’ (including donations, subsidies, membership fees and religious alms); and the productive sector (including banking, lottery, cooperatives and businesses).



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