COVID 19: How Islamic Financial Instruments Can Help

Benevolent Loans

Al-Qard al-Hasan can be translated as a “benevolent loan”. It is a type of loan where the lender does not expect anything in return from the borrower except the capital sum and the reward from Allah the Almighty in the hereafter.

This is quite rare nowadays. Nonetheless, if practiced virtuously, this Islamic finance instrument can help the COVID-19 impacted individuals regain financial stability and economic strength.

Suppport AboutIslam.net

Additionally, it will strengthen the bond of brotherhood between the lender and the borrower as there is no capital gain involved.

According to the Gulf news, the central banks in the GCC countries extended no cost credit lines to the Islamic banks. The COVID-19 impacted individuals and businesses were granted a temporary subsidized financing to reestablish their financial status.

Micro-economic View

Majority of the world’s Muslim population is concentrated in developing countries. A good chunk of population in such countries are daily wage earners. The restrictions imposed as a result of this pandemic have cost these workers their jobs, thus making them struggling to meet their daily needs.

Many valiant leaders have stepped up to help the people impacted by this deadly disease.

For example, the author took on a mini pilot project on an individual basis. A sum of $50 was collected from each working family member of the household. The total was $250. This was a trivial amount in the US. However, when this money was sent overseas, 14 families were provided with one month of non-perishable food supplies.

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Simple math and little planning went a long way. Similar projects were initiated by many other groups in developing countries such as India, Pakistan, Bangladesh, and Sri Lanka.

This was necessary because unlike the government that came up with a robust stimulus package to help individuals and businesses affected by the pandemic in the US, Canada, and UK, the government in developing countries did almost nothing.  

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