COVID 19: How Islamic Financial Instruments Can Help

Coronavirus (COVID-19) pandemic has posed as a bigger threat to humankind, no doubt. It has engulfed the entire globe with its everlasting effect on almost all sectors of life. Financial sector has turned out to be the most vulnerable to this devastating disease.

It has not only threatened human existence but has also shaken the global economy. This has been apparent from the stay-at-home orders from the local authorities across countries. As a result, the global financial markets have suffered heavily and the economic strength continues to deteriorate due to this deadly disease.

People have lost their homes; businesses have collapsed, with many companies filing for bankruptcy and thousands of employees losing their jobs.

At the brink of this economic collapse, Islamic economic and financial principles can play a critical role in alleviating some of these challenges.

This is indeed the time for Islamic banks to demonstrate the spirit of Islamic principles underlying banking and finance. What sets apart Islamic banks from conventional (riba-based) banks is the spirit of brotherhood.

What has been done so far?

As a response to the COVID-19 pandemic, many Islamic banks in various jurisdictions have offered temporary relief to their clients. This includes payment deferment, finance restructuring, refinancing, reduced repayments, and zero fees.

Giving respite to a distressed debtor is explicitly mentioned in the Quran: {If the debtor is in (financial) difficulty, let there be postponement of the payment till ease (of his monetary condition). But if you remit/write-off the debt by way of charity, it would be better for you, if you understand.} (Al-Baqarah 2:280)

Helping the financially distressed is enshrined in the Shariah.

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