Islamic Finance and COVID-19 Recovery: The Role of Profit-Loss Sharing Contract

ABSTRACT This note uncovers the beauty of Islamic finance via its Profit-Loss Sharing Contract (PLSC) as a financing tool in helping the economy and businesses to recover from COVID-19 economic crisis. PLSC is a contract that shares business risks between participants, while Interest-Based Contract (IBC) requires entrepreneurs to bear the entire business risks. Besides its fairness and justice in wealth creation and income distribution, past literature have shown that PLSC has been successfully adopted in various countries across industries. Redesign of mind-set and role from self-interest to common interest and from intermediaries to entrepreneurs are needed for the financial sector to embrace the benefits of PLSC towards achieving economic and societal sustainability. Keywords: COVID-19 pandemic; Profit-loss sharing; Islamic finance; sharing risk ABSTRAK Kertas kerja ini merungkai keindahan konsep kewangan Islam melalui Kontrak Perkongsian Untung Rugi (PLSC) sebagai alat pembiayaan dalam membantu firma perniagaan untuk keluar dari kemelut krisis ekonomi akibat pandemik COVID-19. PLSC merupakan kontrak pembiayaan yang melibatkan perkongsian risiko perniagaan antara peserta, sementara Kontrak Berasaskan Faedah (IBC) menghendaki pengusaha menanggung keseluruhan risiko perniagaan. Selain terkenal dengan konsep adil dalam penciptaan kekayaan dan pengagihan pendapatan, literatur masa lalu menunjukkan bahawa PLSC telah berjaya diguna pakai di pelbagai negara dalam berbagai industri. Mereka-bentuk semula pemikiran sektor kewangan daripada konsep ‘penting-diri’ kepada kepentingan bersama di samping perubahan peranan daripada sebagai ‘pengantara’ kepada ‘usahawan’ amat diperlukan agar sektor kewangan dapat memanfaatkan kelebihan PLSC bagi mencapai tahap ekonomi dan sosial yang mapan. Kata kunci: Pandemik COVID-19; perkongsian untung rugi; kewangan Islam; perkongsian risiko

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