Funding Covid-19 Economic Stimulus Through Islamic Social Finance: A Proposal for Impact-Waqf SRI Sukuk

Funding Covid-19 Economic Stimulus Through Islamic Social Finance: A Proposal for Impact-Waqf SRI Sukuk

Syed Marwan (Institute of Islamic Banking and Finance, International Islamic University Malaysia, Malaysia), Nor Razinah Mohd Zain (Institute of Islamic Banking and Finance, International Islamic University Malaysia, Malaysia), Engku Rabiah Adawiah Engku Ali (Institute of Islamic Banking and Finance, International Islamic University Malaysia, Malaysia) and Mohamed Aslam Haneef (Institute of Islamic Banking and Finance, International Islamic University Malaysia, Malaysia)
DOI: 10.4018/978-1-7998-6811-8.ch008
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Abstract

The COVID-19 pandemic is an unprecedented humanitarian challenge which requires innovative solutions. One apparent challenge among governments is to come up with appropriate funds to finance economic stimulus packages. Such stimulus packages are necessary for the protection and wellbeing of the people and to ensure that the economic operations remain intact. By looking into Islamic economics, various solutions can be explored as offered through Islamic social finance instruments such as zakat, waqf, and sadaqah, as well as its innovative solutions specifically available from the capital market sectors. This chapter explores the potential development of an impact-waqf SRI sukuk for funding economic stimulus packages, with special focus to Malaysia. This chapter proposes a solution in achieving such purpose by referring to the Impact-Waqf SRI sukuk, either based on temporary or permanent cash waqf structure. Returns of investments to investors ultimately depend on the social impact and key performance indexes (KPIs) as achieved from the economic stimulus packages. It is found that the impact-waqf SRI sukuk can be issued either by the government or government-linked company (GLC) and economic stimulus packages can be offered to institutional as well as retail sectors. An option can be given to the investors to waive-off their claims on the capital and returns. Consequently, the government can offer tax rebates or coupons which are equivalent to the value of the waived-off investment.
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Introduction

The COVID-19 pandemic was first detected in December 2019 at the City of Wuhan, China (WHO, 2020) and has triggered an unprecedented socio-economic challenge in the modern world economy. The COVID-19 pandemic is caused by a newly discovered virus (known as COVID-19) that originates from a family of coronaviruses that appears as a common cold that can lead to respiratory failure to the patients. While there are continuous initiatives done and monitored by the World Health Organizations (WHO), many governments are struggling to overcome the COVID-19 pandemic and its spread among their citizens. As of the 28th of April 2020, there were 3,081410 reported positive cases of COVID-19, while the death toll is exceeding 200,000 worldwide (see Table 1.0) (Elflein, 2020; The Star, 2020). Currently, the United States of America (USA) is the most impacted country in the world with the highest number of reported positive COVID-19 and death cases, which surpassing China. A high number of reported positive COVID-19 and death cases are also reported in Spain, Italy, Germany, and France. The collected data is derived from 210 countries across six (6) continents worldwide.

Table 1.
Worldwide Data on COVID-19 Cases of Recoveries and Deaths (as at the 28th of April 2020)
CasesTotal
Recoveries931,836
Deaths212,337
Reported Positive COVID-193,081410

Source: Elflien (2020).

With the rapid increase in the worldwide graph on reported positive COVID-19 and death cases, many countries have taken various initiatives to flatten the curve. Even though there are various disaster management strategies that exist, the unique characteristics of COVID-19 pandemic and the speed that it spreads (see Table 2.0) have a significant influence on the pandemic management strategies. Due to these unique characteristics of COVID-19 pandemic, a majority of countries are implementing: (i) a national level of lockdown or quarantine by closing borders or strict requirements to enter their countries; (ii) a complete social distancing with legal enforcement through penalty or imprisonment in the case of failure to comply; and (iii) a comprehensive national level of public health approaches such as by propagating self-cleanliness campaigns among their citizens. There are also global and national level initiatives to develop a vaccine for COVID-19 pandemic (WHO, 2020).

Table 2.
Causes of COVID-19 to Spread and its Pandemic Management Strategies
Causes of COVID-19 SpreadPandemic Management Strategies
COVID-19 spreads from a positive infected person to a healthy person through:
- small droplets from the nose or mouth;
- coughs, sneezes, or speak.
(i) Lockdown or quarantine:
- The period of quarantine is 14 days due to a variety of symptoms from the common cold to pain chest, and also in some cases, there are no symptoms.
(ii) Social distancing:
- Stay at least 1 metre or 3-feet from each other.
Touching objects or surfaces contaminated by the virus. The surfaces can be:
- tables, doorknobs, and handrails;
- other possible surfaces, etc.
(i) Self-cleanliness campaigns:
- frequently washing hands;
- frequently clean oneself;
(ii) 'Stay at home' campaign:
- Close down of government offices, companies, etc;
- Close down of public places
- Avoid public gathering;
- Only allow to go out for food supplies and necessities.
Touching face, eyes, nose or mouth with hands that contaminated with the virus(i) Frequently washing hands with soap and water or use the alcohol-based hand sanitiser.
(ii) Self-quarantine in the appearance of symptoms.

Source: World Health Organization (WHO) (2020).

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