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The Impact of COVID-19 Pandemic on Islamic Finance According to the Dinar Standard Report 2021/2022
Author : Dr. Safwan Odaybat
Date Added : 11-09-2022

The Impact of COVID-19 Pandemic on Islamic Finance According to the Dinar Standard Report 2021/2022

 

COVID-19 pandemic had an evident impact on the economic, social, and political sectors of life. The Islamic finance sector is a key contributor to economic life worldwide, given its development and incremental aspects of growth in recent years.

Amongst the most important and precise technical studies indicating the impact of the COVID-19 pandemic on Islamic finance (2021/2022) in numbers is the report prepared by Dinar Standard in partnership with Salam Gateway with the support of DIEDC. This report was published by the International Islamic Center for Reconciliation and Arbitration (IICRA) in Dubai, Edition No. (19), 4rth quarter, 1443 H/June 2022.

The key points of this report are:

First: The value of Islamic finance assets in 2019 has risen from 2.52 trillion US dollars to 2.88 trillion US dollars amounting to 13.9%. The report expected this sector to recover over the coming five years with an overall growth by 5%.

Second: The rapid growth of the Islamic Takaful insurance, especially in the Gulf countries and Indonesia.

Third: 2020 witnessed a large number of initiatives and measures that help enhance the growth of Islamic finance, particularly in the countries of the Organization of Islamic Cooperation. In addition, it was decided to establish new Islamic banks in countries such as Tajikistan, Uganda and the Philippines, in addition to digital banks in Kazakhstan and Malaysia.

Fourth: The investment of Islamic Financial Technology as well as the combination Islamic financial institutions through out possession and combination that reached 4.93bn. in 2019 to 2020.

Fifth: The activity of the Islamic Sukuk decreased but didn`t stop where it was announced that new Sukuk were issued in south Africa, Nigeria, Britain, Gulf and south east Asia countries.

Sixth: Developing the sector of social finance through collective funding, fostering partnerships between the private and public sectors or supporting small and medium-sized finance institutions. 

Based on the above notes, the following can be noticed:

  1. Despite the fact that the report was prepared during the COVID-19 pandemic, Islamic finance has witnessed an evident growth and recovery is expected in the coming years. In the same year of preparing this report, the number of the Islamic finance institutions has reached 1462.
  2. Adopting social finance that rests on Takaful and cooperation between people to ease their problems, as is the case with Zakah (Alms giving) and Sadqah (Voluntary charity) and providing financial support to small and medium-sized financial institutions. Moreover, partnership between the private and public sectors is an example of this form of finance. New platforms have been established for collective funding between counterparts in Britain and Malaysia, and an initiative was launched to benefit from social Islamic finance in the UN in partnership with the Islamic Bank for Development in 2021 (news.UN.org).
  3. The COVID-19 pandemic encouraged Islamic finance to develop financial technology through modern electronic platforms, digital banks, and distinguished services of digital banking.
  4. Islami Sukuk have witnessed a remarkable growth within the recent years. As indicated by the report, this product hasn`t stopped despite the impact of the COVID-19 pandemic where their issuance was resumed in several countries. Here, it is worth pointing that later in the year 2021, the fourth issuance of the Sukuk for the Murabah to the purchase orderer were issued in favor of the Jordan National Electricity Company to fund the energy sector with a total value of 225 million JDs by an annual Murabaha percentage of 3.55% over five years.

Unequivocally, these notes indicate that the Islamic finance sector is replete with Sharia, technical, and legal competencies enabling it to face difficult situations, such as COVID-19 pandemic to create an opportunity to keep abreast with developments, innovate new products to address the needs of the people, and continue Islamic finance services.  

 

The published article reflects the opinion of its author

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Summarized Fatawaa

What is the ruling on eating or drinking forgetfully during the day in Ramadan or during voluntary fasting?

Whoever eats or drinks forgetfully while fasting, whether in an obligatory or voluntary fast, should continue their fast, for it is Allah who has provided them with food and drink. There is no difference between obligatory and voluntary fasting in this ruling.

What is the ruling on someone who intends to travel to Jeddah for two days — must he enter iḥrām from his place of residence [i.e., before passing the mīqāt]?

All praise is due to Allah, and peace and blessings be upon our master, the Messenger of Allah ﷺ.
Whoever is firmly resolved in his intention to perform ‘Umrah before setting out on his journey, it is unlawful for him to pass beyond his country's mīqāt (the designated boundary point for entering the state of iḥrām) without entering iḥrām. If he does so, he must return to the mīqāt to enter iḥrām from there, provided he has not yet begun performing the rites of the pilgrimage — in which case nothing further is required of him. However, if he does not return, he must offer a sacrifice (sheep/goat), to be distributed among the poor of the Ḥaram.
It is stated in at-Tanbīh fī al-Fiqh ash-Shāfi‘ī (p. 71): "Whoever, intending to perform the rites [of ‘Umrah or Ḥajj], passes beyond the mīqāt and enters iḥrām only after it, must offer a sacrifice. However, if he returns to the mīqāt before beginning any of the rites, the sacrifice is waived from him."
Accordingly: whoever is firmly resolved in his intention to perform ‘Umrah before setting out on his journey must enter iḥrām at the mīqāt of his country through which he passes. Whoever fails to do so, passing beyond the mīqāt without entering iḥrām, and does not return, has sinned, and must repent to Allah, the Exalted; and he must offer a sacrifice, to be distributed among the poor of the Ḥaram. And Allah, the Exalted, knows best.

What is the ruling on deliberately breaking the fast while being capable of fasting?

Whoever intentionally breaks their fast in Ramadan without a valid excuse has committed a major sin and bears great guilt. They must repent, seek forgiveness, refrain from eating and drinking for the rest of the day, and make up for that day after Ramadan.
They have lost an immense reward, which cannot be compensated even by fasting an entire lifetime as a voluntary act, because an obligatory fast cannot be equaled by voluntary fasting.
If the fast was broken through sexual intercourse, the person must:
● Make up for the missed fast (qada), and
● Perform kaffarah by fasting two consecutive months.
● If they are unable to do so, they must feed sixty needy people.

What is the ruling on waiving a debt owed by a debtor and counting it toward zakāh?

All praise is due to Allah, and peace and blessings be upon our master, the Messenger of Allah ﷺ.
Waiving a debt owed by a debtor, with the intention of counting it toward zakāh, does not fulfill the zakāh obligation. Rather, it constitutes an ordinary act of charity, for which Allah rewards the giver generously — since one of the conditions for the validity of zakāh is that the person paying it must form the intention of zakāh at the actual moment the wealth is paid out. In this case, the debt has already been established as a standing obligation upon the borrower, so it is not valid to simply redirect the intention toward zakāh after the fact.
It is preferable, instead, for the creditor to first collect the debt from the debtor, and then return to him the amount of money he is required to pay as zakāh — or a portion of it — if the debtor happens to fall under one of the eight categories that Allah, the Exalted, has commanded be given from zakāh.
It is stated in ‘Umdat as-Sālik, from the books of the Shāfi‘ī school: "If someone gives [money] to a poor person, stipulating that the recipient return it to him in payment of a debt owed to him, or says, 'I am making what you owe me into zakāh, so take it [as such]' — this is not valid. But if he gives it to him with the [unstated] intention that the recipient will use it to repay him, or says, 'Repay what you owe me, so that I may [then separately] give it to you as zakāh,' or the debtor himself says, 'Give it to me, so that I may [then] repay you with it' — this is valid, and there is no binding obligation for the recipient to actually fulfill this [informal understanding]." And Allah, the Exalted, knows best.

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