These Islamic finance social instruments could help countries navigate COVID-19

The instruments are Qard Hassan, social Sukuk, Waqf, and Zakat

“As corporations and individuals grapple with the impact of COVID-19 on their revenue, Qard Hassan from banks could provide breathing space until the environment stabilizes,” S&P said.

– Social sukuk: A sukuk where the rate of return declines if the issuer fulfills certain social objectives.

“These instruments could help support the education and health care systems amid the current crisis and attract particularly ESG investors (those looking to invest for social reasons) and/or Islamic investors (looking for Sharia-compliant investments),” S&P said.

– Waqf: A donation of an asset or cash for religious or charitable purposes with no intention of repayment or remuneration.

“Waqf in the current circumstances could help provide affordable housing solutions or access to health care and education for people that might have lost a portion of their income,” S&P said.

– Zakat: Similar to a tax levied on wealth over a certain threshold.

“Based on our conversations with market participants, we believe that Zakat could help compensate the loss of income for households because of COVID-19,’ S&P said.

(Writing by Gerard Aoun; editing by Seban Scaria)



Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.

© ZAWYA 2020

You may also like