This study aims to analyse the most preferred financing type among Malaysian Islamic banking consumers and the preferred Islamic banking contracts by Islamic bankers during COVID-19 pandemic. This paper also examines whether Malaysian Islamic banks are better off with debt-based portfolios during COVID-19. The methodology for this study is qualitative approach, using survey and interview as primary data and literature study as secondary data. The findings of this paper show that Malaysian Islamic banking consumers preferred variable-rate financing/instruments and Islamic bankers preferred debt-based contracts such as Tawarruq and Ijarah. Thus, debt-based financing with variable-rate mechanism is the most preferrable and practicable during COVID-19. The implication for regulators and industry players are to strengthen the policy with regards to debt-based financing and review all the Islamic finance contracts related policy document to include the clauses related to moratorium and economic crises associated with pandemic.