The Role of Islamic Banking in the Pandemic Era

Islamic Bank, The last four years will always be remembered throughout human history. Not a good memory but a bad memory because of limitations to move freely due to a deadly virus. The virus is SARS-CoV-2. The virus, which was first identified in the city of Wuhan, China on December 1, 2019, then entered Indonesia in March 2020. This incident was later known as the Covid-19 pandemic.

To stop the spread of Covid-19, the government issued a policy, namely residents are required to quarantine themselves by staying at home and not gathering with many people. With this, everyone who stays at home and does not carry out economic activities makes the country experience an economic downturn. At a time when the country is focused on improving economic conditions, it turns out that Covid-19 cases have not decreased and have even increased every day. This is because it was not accompanied by good handling of the Covid-19 case. An example is Indonesia experiences an average addition of cases of 1.7% and deaths of 1.3% every day. Even Indonesia’s economic conditions have not improved, as evidenced in the second quarter of 2020 economic growth was recorded at -5.3%.

Islamic banking plays an active role in national economic recovery

Instruments that play an important role in supporting economic recovery programs and reducing poverty through community economic empowerment. Islamic finance provides ways, and frameworks, for managing assets and transactions based on the principles of fairness and sincerity. This can be seen from the fair risk financing mechanism in sharia financing and the social presence of sharia finance such as zakat, waqf, and the faq.

In the last decade, Islamic finance has become one of the fastest-growing sectors in the global financial industry, even outpacing conventional financial markets. According to the Global Economic Report (2020), the value of Islamic financial assets increased by 13.9% in 2019, from $2.52 trillion to $2.88 trillion. As a result of the impact of the COVID-19 crisis, the value of Islamic financial assets in 2020 will not experience growth but is projected to recover and grow at a 5-year annual growth rate (CAGR) of 5% from 2019 onwards reaching $3.69 trillion in 2024.

The downturn affected almost all sectors, especially the economic sector, which has become the world’s spotlight. Almost the whole world feels the same way. As an effort to reduce the impact of the Corona Virus Disease 2019 (COVID-19) pandemic, the government has issued the National Economic Recovery (PEN) program. The National Economic Recovery Program (PEN) is one of a series of activities to reduce the impact of COVID-19 on the economy.

Islamic banking with a profit-sharing system can meet the working capital needs of small entrepreneurs. Through sharia banks, the government distributes funds to overcome economic problems in society. Islamic banks issue MSME financing as a form of overcoming capital problems in building new businesses in society during a pandemic so that people can use capital from MSME financing as initial capital to develop a business to earn new income when there is a layoff due to the impact of the pandemic at work and make a living through recently built business.

Reaching a prosperous and prosperous Indonesia in the pandemic era may seem difficult, but it’s impossible if the problem doesn’t have a solution. Hopefully, in the future, Indonesia will be able to improve its economic conditions to be better than before. It doesn’t matter how bad things get, we can always get back up as long as we don’t give up.

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