7/14/2020 Islamic Finance and Prospects for Weathering COVID-19 – Islamic Microfinance News

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Islamic Finance and

Prospects for Weathering
COVID-19
 IMFN  May 14, 2020  No Comment

COVID-19 continues to have profound implications for the global

economy. All around the world, the lockdown has contributed to rising
unemployment, reduced incomes, and increased food insecurity.
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Private sector workers and the self-employed are disproportionately Pro le
a ected by the downturn. Many experts warn that this could be severe
and long-lasting.
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To counter the looming recession, governments and international

Comments
organizations have implemented policies to support their economies
and assist developing countries. These measures include lowering Islamic Development Bank
interest rates, deferring loan repayments, and injecting stimulus Group in partnership with the
UAE Ministry of Economy and
packages into their economies. While such measures are common Annual Investment Meeting
during times of economic crises, they often fall short in meeting the Hosted a Live Webinar To
Discuss Challenges Facing Co-
needs of the vulnerable members of society. Islamic nance and
VID 19 July 13, 2020
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7/14/2020 Islamic Finance and Prospects for Weathering COVID-19 – Islamic Microfinance News

economic practices promote equitable growth, especially during Malaysia’s Shariah Advisory
Council Permits Cryptocurrency
challenging times. Trading July 11, 2020

Is microcredit working? July 10,

Islamic nance is based on Islamic law (Sharia) and is guided by a set 2020
of moral and ethical principles. These include honesty and
FinTech can help Islamic
transparency, as well as the prohibition of usury (riba), uncertainty nance sector to innovate July
10, 2020
(gharar), and speculation (mayssir). A ‘typical’ Islamic economic system
encourages welfare (maslaha), promotes wellbeing (falah), and Islamic Development Bank
Group to respond to COVID-19
prevents harm (mafsadah). Transactions rest on contracts that with USD 2.3 Billion package
promote partnerships, pro t and loss sharing, as well as links to the and to launch three supportive
and robust initiatives in
real economy. In times of crises—like the current outbreak of the
partnership with UAE Ministry
coronavirus—such principles support mechanisms that bridge the of Economy and Annual
Investment Meeting (AIM) July
nancial disparities in many countries.
9, 2020

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Islamic
Development Bank
Group in
partnership with
the UAE Ministry
of Economy and
Annual Investment
Meeting Hosted a
Live Webinar To
Discuss Challenges
Facing Co-VID 19
July 13, 2020 - No Comment

Malaysia’s Shariah
Advisory Council
Additionally, Islamic nance promotes social responsibility and Permits
Cryptocurrency
solidarity through almsgiving (zakat), endowment (waqf), charity
Trading
(sadaqah), and interest free loans (qard hasan). At the heart of these July 11, 2020 - No Comment

transactions are Islamic micro nance institutions and charitable

organizations that have been features of Muslim societies for Is microcredit
working?
centuries. Such institutions typically work with vulnerable communities
July 10, 2020 - No Comment
that lack access to basic safety nets, such as education, health, and
food. They also provide nancial assistance to small businesses that FinTech can help
are often denied by private organizations. In doing so, Islamic Islamic nance
sector to innovate
micro nance institutions lay the foundation for projects that generate
July 10, 2020 - No Comment
income and reduce future reliance on charitable donations.

Islamic
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7/14/2020 Islamic Finance and Prospects for Weathering COVID-19 – Islamic Microfinance News

While Islamic nance could play an important role in the Islamic to COVID-19 with
USD 2.3 Billion
world’s recovery from COVID-19, the onus is on governments to package and to
initiate and lead projects that rebuild economies and societies. The launch three
supportive and
pandemic has highlighted the need to rethink the provision of
robust initiatives
healthcare services. New conversations on supply chains and critical in partnership with
UAE Ministry of
infrastructure are also required. To this end, sukuk (bonds) could
Economy and
provide innovative and sustainable sources of nance for recovery and Annual Investment
regeneration projects. Meeting (AIM)
July 9, 2020 - No Comment

While sukuk can mobilize nancing for a variety of sustainable

projects, the market has recently witnessed the development of Int’l Events Associates with
Al Huda
sustainable and responsible investment (SRI) and green sukuk. Social
issues, such as immunization programs and educational initiatives
should be a priority. Next is the environment and sustainability
development, including renewable energy supplies and access to clean
water. Some experts suggest uniting both of these under the umbrella
term: sustainable and responsible investment (SRI) sukuk.

The roots of “pandemic sukuk” can be traced back to 2017, when the
World Bank rst mooted the idea of pandemic bonds to support the
Pandemic Emergency Financing (PEF) facility. This mechanism provides
funding to developing countries that are at most risk of serious
Lease Conference Dubai 2020 -
disease outbreaks. PEF becomes available once an outbreak reaches
November 18 – 19, 2020 at Dubai
predetermined levels of contagion and spreads across international
borders.

At the time of writing, PEF has not been used in the global ght against
COVID-19, a decision informed in part by the complexity of its trigger
mechanisms. However, “pandemic sukuk” is by no means predestined
to go the same way. Unlike PEF, this form of sukuk can leverage
Islamic practices, such as zakat and waqf, to develop nancial
mechanisms that target both recovery and sustainability. Potential
target investors could include companies and diaspora communities.
The latter has signi cantly contributed via social media to informal
community initiatives to tackle COVID-19.

The underlying principle of all forms of sukuk is “maqasid,” meaning

that the ultimate objective of religion is to preserve faith, life, reason,
liation, and wealth. Anything that upholds these ve objectives is
15 whereas anything that negatively impacts them is
“maslaha,”
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7/14/2020 Islamic Finance and Prospects for Weathering COVID-19 – Islamic Microfinance News

“mafsadah.” Sustainable economic practices are embedded in the

“maqasidi” approach to development. This approach also emphasizes
the importance of improving the lives and wellbeing of individuals and
societies.

COVID-19 has highlighted the need for a paradigm shift on public

service and nancial disparities. Islamic nance and economic
practices are well-positioned to support the overhaul of public
nancial management systems and the strengthening of health,
education, and food security infrastructures. Towards this end,
governments and multilateral institutions should explore the potential
of pandemic sukuk, a new asset class that targets both conventional
and Islamic investors

Courtesy by :https://intpolicydigest.org/2

62

 Islamic Banking, ISLAMIC FINANCE, Islamic Finance Program

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7/14/2020 Islamic Finance and Prospects for Weathering COVID-19 – Islamic Microfinance News

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