Joint International Seminar 2014 | Yuli Andriansyah | 1 Constructing an Islamic Economic Model for Local Autonomy and Fiscal Decentralization: A Preliminary Study Yuli Andriansyah Department of Islamic Economics, Faculty of Islamic Studies, Islamic University of Indonesia Gedung K.H. A. Wahid Hasyim, Kampus Terpadu UII, Jl. Kaliurang KM 14,5 Besi, Sleman, DI Yogyakarta, 55584, Tel. 0274-898462, Fax. 0274-898463 e-mail: yuliandriansyah@uii.ac.id Abstract Islamic economic system has developed for more than two decades in Indonesia with Islamic banking and finance as its frontrunner. During this developmental period, Indonesia has experienced political and economic development characterized by the reformation movement that followed by regional autonomy and fiscal decentralization. The regional autonomy and fiscal decentralization had in the last decade an important part for Indonesian as a democratic nation in awakening. However, the concentration of Muslim experts on economics and finance to regional autonomy and fiscal decentralization is still very limited. Based on this background, this study is aimed to construct an Islamic economic model for regional autonomy and fiscal decentralization in the Indonesian context. The analysis used is a literature review to develop a theoretical foundation for regional autonomy and fiscal decentralization in Islam with reference to the historical experience of Muslims. In addition, the analysis was also performed to evaluate the implementation of regional autonomy and fiscal decentralization in Indonesia with reference to the theoretical foundation previously established. The results of this study indicate that historically the concept of autonomy did not have a strong foundation and root in Islamic civilization. From the very beginning of Islam until the age of the Ottoman Empire, concept of Madīna as term used for urban life and centralized political system was more dominant in the construction of the Islamic community. The form of a more autonomous community and decentralized political system was found in concept of Balādiyya which known in Islam since the Ottoman Empire’s involvement with the European community. From the concept of Balādiyya this study then arranged an autonomy and fiscal decentralization in perspective of Islamic economics then used it to analyze the condition of local autonomy and fiscal decentralization in Indonesia today. The results indicate there are many economic, political, and cultural issues that cause the objectives of regional autonomy and fiscal decentralization in Indonesia have not been reached appropriately. Keywords: local autonomy, fiscal decentralization, Islamisation of economics