Do Islamic Banks Act ‘Islamic’ During COVID-19 Pandemic?

Authors

  • Amir Shaharuddin Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia

DOI:

https://doi.org/10.33102/jmifr.v17i3.279

Keywords:

Islamic banking, COVID-19, Maqasid al-Shariah

Abstract

The world is currently experiencing the most unprecedented health crisis. As of June 2020, the Corona disease has infected more than 8 million people and caused 465,000 deaths worldwide. The world economy is also impacted by the Corona virus pandemic known as COVID-19. Malaysian government estimates that the economic losses since the enforcement of national lockdown amounts to RM63 billion. Subsequently, a huge stimulus package worth RM250 billion was distributed to sustain the domestic markets. In addition, individuals and businesses were offered moratorium which gives six months deferment of installment to cope with financial challenges during this difficult time. The implementation of moratorium however raises a polemic within the Islamic banking industry locally. Customers question the justification used by Islamic banks in imposing additional charges after the expiry of moratorium period. The criticism to certain extend has labelled Islamic banks similar with their conventional counterparts for prioritizing profit over social responsibility. Thus, the article analyzes the moratorium issue based on the framework of Shariah objectives (maqasid). The analysis will not only shed light on the current moratorium polemic but also provides a comprehensive view for the broader issue pertaining to the dichotomy between the theory and practice of Islamic banking industry.

References

Ahmed, H. (2011). Maqasid al-Shariah and Islamic financial products: A framework for assessment. ISRA International Journal for Islamic Finance, 3(1), 149-160.

al-Sadr, M. B. (2014). Iqtisaduna (Our economic) (vol.1.). Create Space Publishing.

Bakar, M. D. (2016). Shariah minds in Islamic finance: An inside story of a Shariah scholar. Amanie Media

Bank Negara Malaysia. (2018). Value based intermediation: strengthening the roles and impact of Islamic finance. Retrieved June 22, 2020, from https://www.bnm.gov.my/index.php?ch=57&pg=137&ac=612&bb=file#

Bank Negara Malaysia. (2020, March 25). Measures to assist individuals, SMEs and corporates affected by COVID-19 [Press release]. https://www.bnm.gov.my/index.php?ch=en_press&pg=en_press&ac=5018&lang=en

Chapra, M. U. (1995). Towards a just monetary system. The Islamic Foundation.

Haniffa, R., & Hudaib, M. (2007). Exploring the ethical identity of Islamic banks via communication in annual report. Journal of Business Ethics, 76, 97-116. https://doi.org/10.1007/s10551-006-9272-5

Hasan, Z. (2005). Islamic banking at the crossroads: Theory versus practice, In Iqbal M., & Wilson, R. (Eds.), Islamic perspective on wealth creation. Edinburgh Press.

International Monetary Funds. (2020). An early view of the economic impact of the pandemic in 5 charts. Retrieved May 4, 2020, from https://blogs.imf.org/2020/04/06/an-early-view-of-the-economic-impact-of-the-pandemic-in-5-charts/

Kamla, R., & Rammal, H. G. (2013). Social reporting by Islamic bank: Does social justice matter?, Accounting, Auditing and Accountability Journal, 26(6), 911-945. https://doi.org/10.1108/AAAJ-03-2013-1268

Khalid, N. (2020, May 3). Impact on pandemic on economy and recovery policy. Bernama. https://www.bernama.com/en/features/news.php?id=1829686

Mat Nor, F., Shaharuddin, A., Nawai, N., & Wan Abdullah, W. Z. (2017). Risk management of full-fledged Islamic banks versus Islamic subsidiaries of conventional banks in Malaysia: The sustainable growth within restricted minimum requirements. The Journal of Muamalat and Islamic Finance Research, 14(2), 1-37. https://jmifr.usim.edu.my/index.php/jmifr/article/view/18/19

Miralles Quiros M. M., Miralles Quiros J. L., & Hernandez J. R., (2019). ESG performance and shareholder value creation in the banking industry: International differences. Journal of Sustainability, 11(1). 1404. https://doi.org/10.3390/su

Mokhtar S. (2020). Home [Linkedln page] Activity https://www.linkedin.com/posts/modificationloss-accounting for Islamic banks activity-6661965872472567808-AJBI

Platonova, E., Asutay, M., Dixon, R., & Mohammad, S. (2016). The impact of corporate social responsibility disclosure on financial performance: Evidence from the GCC Islamic banking sector. Journal of Business Ethics, 151, 451–471. https://doi.org/10.1007/s10551-016-3229-0

Prime Minister Office. (2020). PRIHATIN stimulus package. Muhyiddin Yassin’s speech on additional PRIHATIN stimulus package (SMEs). Retrieved May 3, 2020, from https://www.pmo.gov.my/wp-content/uploads/2020/04/English-PM-Speech-PRIHATIN-Plus-6-4-2020-905pm.pdf

Shariah Advisory Council. (2020). Ruling on operationalization of moratorium for Islamic financing. Bank Negara Malaysia.

Shinaj, V. S., Ziyad, M., Baharom, A. H. (2020). COVID-19: Opportunity to showcase the ethical repute of Islamic bank? COVID-19 economic outlook series. INCEIF.

Siddiqi, M. N. (1983). Banking without interest. The Islamic Foundation.

Soana, M. (2009). The relationship between corporate social performance and corporate financial performance in banking sector. Journal of Business Ethic, 104 (1), 133-148. https://doi.org/10.1007/s10551-011-0894-x

Syarifah, S. J. (2020). Bank risks modification loss by waiving additional HP interest. The Edge Market. Retrieved June 12, 2020, from https://www.theedgemarkets.com/article/banks-risk-modification-loss-waiving-additional-hp-interest-

Watkins, J. P. (2011). Banking ethics and the goldman rule. Journal of Economic Issues, 45(2), 363-372. https://doi.org/10.2753/JEI0021-3624450213

Yassin, M. M. (2020, May 1). Perutusan Khas Perdana Menteri Sempana Hari Pekerja 2020. Prime Minister Office. https://www.pmo.gov.my/2020/05/perutusan-khas-perdana-menteri-sempena-hari-pekerja-2020/

Published

2020-11-04

How to Cite

Amir Shaharuddin. (2020). Do Islamic Banks Act ‘Islamic’ During COVID-19 Pandemic?. The Journal of Muamalat and Islamic Finance Research, 17(3), 3-12. https://doi.org/10.33102/jmifr.v17i3.279