Publication:
The impact of the COVID-19 pandemic on financial obligations in Islamic banks: A critical appraisal
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Date
2024
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Abstract
This research aims to examine the impact of the Covid-19 pandemic on contractual obligations in Islamic banks. It explores the Shariah issues arising from the pandemic, the Shariah approaches considered in addressing these issues, and the rights of the various contracting parties affected by the pandemic. The study employs both descriptive and analytical methodologies. The descriptive approach is used to analyze the fiqh perspectives on Covid-19 and relevant jurisprudential theories, while the analytical approach assesses the application of Islamic legal maxims to contractual obligations and evaluates the consequences on existing contracts within the Islamic finance industry. Additionally, a comparative approach is adopted to examine the Ijtihad (independent reasoning) of both classical and contemporary scholars, highlighting the pandemic's impact on key Islamic financial transactions. The study concludes that postponing the payment of installments under a murabahah contract with a fixed profit rate, or rescheduling with an increase, would result in the prohibited practice of pre-Islamic riba. However, in a murabahah contract with a variable or floating rate, where the contract stipulates a higher price or ceiling profit rate, the bank may commit to providing a rebate (ibra') to customers who pay their installments as scheduled. In such cases, the customer is only required to pay the effective rate. Furthermore, the study finds that banks may adjust future installments in lease contracts and diminishing partnership contracts (musharakah mutanaqisah), but not for installments that are already due and payable. Importantly, banks should not require customers to pay additional amounts to cover losses incurred during the postponement period.
Keywords
Disaster (Jawa i?) Theory , Covid-19 Pandemic , Islamic Finance , Contractual Obligations , Theory of Emergency Conditions , Non-Performing Financing , Rescheduling
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Publisher
Mashura Journal
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