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COVID 19: How Islamic Financial Instruments Can Help

Islamic Fintech

We live in the age of technology and innovation. Fintech is the driving force of the 21st century. Islamic Fintech is taking over much of the market share of the total Islamic banking and finance. Especially with the outbreak of COVID-19, Islamic Fintech surged across the globe since almost everything became remote.

As for Islamic banking, Islamic Fintech will provide the much needed avenue of remote banking in response to the current crisis.

It will also help mitigate the cash flow constraints. Researchers predict that Islamic Fintech will play a significant and promising role in the Post COVID-19 era especially in the Islamic banking sector (S&P Global Ratings).

Zakah and Sadaqah

Zakah and Sadaqah have a special place in Islamic finance. These two forms of charities can play a critical role in helping COVID-19 impacted individuals. Any monetary aid provided through Zakah and Sadaqah are NOT meant to be returned by the recipient.

Although Muslims tend to exercise these two forms of charities primarily in the month of Ramadan, many are unaware that it could also be distributed outside the month of Ramadan. Applying this simple Islamic economic principle and proper channeling and planned distribution of these funds can certainly help alleviate some of the challenges posed by the COVID-19 pandemic.

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S&P Global asserts that Zakah, Waqf, and al-Qard al-Hasan are the core Islamic finance social instruments which can help navigate out of COVID-19.

According to a recent article, a new technology called NLP (Natural Language Processing) using AI (Artificial Intelligence) will be developed to collect information of COVID-19 impacted individuals.

Using the NLP-based Zakah platform, the donor will be able to transfer funds directly to the beneficiaries. This platform is designed to integrate Zakah and al-Qard-al-Hasan funds to efficiently channel it to the beneficiaries.

To sum up, the repercussions of COVID-19 turned out to be much more catastrophic than we had anticipated. It has not only relentlessly attacked human lives but also has caused irreparable damage to our economies.

Undoubtedly, an exit strategy is vital to stabilize individuals, businesses, and corporations that were hit by this pandemic.

Therefore, Islamic financial instruments such as Zakah, al-Qard al-Hasan, and Sadaqah equipped with cutting-edge Islamic Fintech platforms will help alleviate many challenges posed by the COVID-19 pandemic.

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