First: The Role of Social Finance Safety Nets in Mitigating the Effects of the Crisis
Based on its Vision 1440H/2020 (A Vision for Human Dignity), the Islamic Development Bank (IsDB) has been innovative in utilizing the Islamic institutions of benevolence, such as waqf, zakah and sadaqah, to alleviate poverty and fight epidemics in the Member Countries.
The IsDB Group may encourage its Member Countries to develop the Islamic philanthropic sector for the establishment of effective social safety nets on the basis of the Islamic values of cooperation and solidarity.
Historic evidences show that waqf was the main provider of education, health care and natural disasters relief over many centuries.
Some examples of the initiatives taken by the philanthropic sector to mitigate the impact of Covid-19 pandemic are:
Establishment of waqf and social funds to contribute to the effort to face the crisis, such as the Saudi Healthcare Waqf Fund.
Allocations of hotels for quarantine.
Establishment of electronic platforms to encourage social contribution on the part of awqaf institutions and non-governmental organizations (NGOs).
More waqf initiatives that the IsDB may adopt to strengthen social safety nets in its Member Countries to lessen effects of the crisis are:
Partnering with the private sector to establish social investment waqf funds to sponsor scientific research, for combating epidemics and diseases in poor Member Countries.
Establishment of a waqf fund under the umbrella of IsDB supported by all sectors in Member Countries, for the purpose of establishing an Islamic center for research to combat epidemics and diseases in Member Countries, in collaboration with the Pasteur Institute in Senegal.
Second: Shariah Rules and Principles Provide Basis for Mitigating the Impact of the Crisis
The Principle of Forbearance and its impact on the Crisis
The protection of property is one of the higher objectives of Shari’ah.
Debt acquisition is not permitted in Islam except in cases of necessity, such as for the provision of basic needs, and with the intention of repayment of one’s debt obligation.
Taking debt for extravagant and show-off spending is strictly prohibited.
Taking into consideration the strict conditions for the permissibility of indebtedness, Shari’ah has put in place principles and rulings on how to manage debt, striking a balance between the rights of both the creditors and the debtors alike.
Insolvency is a contingent description denoting the state in which a person becomes unable to do his obligatory spending or repay his due debts. An insolvent person is the person who is thus described.
The criterion of insolvency that necessitates forbearance is that the debtor has no possessions in excess of his basic needs to defray his debt in cash or in kind.
Any debtor who succeeds to prove that his case satisfies Shari’ah requirements of insolvency, becomes entitled to forbearance until the time when he is able to repay.
On 25 March 2020, the World Bank and International Monetary Fund (IMF) issued a joint statement calling on all bilateral creditors to suspend debt payments from International Development Association (IDA) countries that request forbearance, in order to help those countries with immediate liquidity needs to tackle challenges posed by the coronavirus outbreak.
Central banks and regulatory authorities in many countries issued directives to commercial banks to give forbearance to debtors, among other measures to lessen the impact of the crisis.
The principle of forbearance should be applied to all deferred obligations, be it installments due for financial institutions, rental payments or service fees, in case of the insolvency.
Effects of the Principal of Wad’ al-Jawa’ih (Contract Waiver Due to Calamities) on Contracts and Obligations
Al-Jawa’ih is the plural of ja’ihah: a natural disaster that destroys crops and fruits on trees, such as winds, rain, lightning, and the like, each of which may devastate the sold crops or fruit prior to its harvest.
Classical scholars restrict the application of the doctrine of Wad’ al-Jawa’ih to corps fruits and fruits.
Contemporary scholars and collective Ijtihad institutions recognize the applications of Wad’ al-Jawa’ih beyond the classical applications, based on analogy and taking into considerations the objectives of the Shari’ah and bearing in mind the people’s interest.
The recognition of the relevance of Wad’ al-Jawa’ih and applying it in the current situation at hand will definitely have a positive impact on finding solutions to the many contracts and obligations affected by the crisis, such as rentals instalments, hotel and travel bookings and the like.
The application of Wad’ al-Jawa’ih means the termination of all sale, lease contracts, and other contracts where the goods and services transacted have not been delivered.
The application of Wad’ al-Jawa’ih to address the effects of the crisis requires a collective Ijtihad (reasoning) founded on definitive rules and objectives of Shari’ah, taking into people’s contexts and interest, and the measures taken by local authorities in each country to mitigate the impacts of the crisis.
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