Using Islamic Social Financial Instruments to assist the MSMEs in Post COVID-19

Abstract

The outbreak of Novel Corona virus has adversely impacted every corner of the global economy from every sole trader to the largest multinational company, either directly or indirectly.  The objective of this paper is to identify the potential Islamic Social Financial Products to be used to overcome the challenges faced by MSMEs due to subsequent events of spreading COVID-19, and the Movement control orders due to the Pandemic in Malaysia. The paper was conducted based on a qualitative research approach of literature study where data were sourced from the primary and secondary sources. All literatures were analysed and reviewed to accomplish the objectives for this paper. As for the main finding of this paper a sustainable Shariah-compliant Islamic Social Financial model is developed to provide interest-free loan as financial assistance to the MSMEs to overcome with the adverse effects of COVID-19. In addition, this paper identified the major challenges faced by the Malaysian and global MSMEs due to COVID-19 and existing mechanisms in the country to provide financial support for MSMEs. This paper recommends conducting a further research on identifying the suitability of the model to be implemented to help people overseas. In addition to that, it is recommended to conduct a study on other risk free or less risky Shariah-compliant investment opportunities in the recreation of the funds to operate the model more sustainably.