The role of Islamic social finance during Covid-19 pandemic in Indonesia’s economic recovery

Abstract

Purpose This study aims to propose Islamic solutions to the Covid-19 health and economic crises, specifically using Islamic social finance (ISF) instruments, including zakat, infaq and waqf. Design/methodology/approach This study applies the qualitative content analysis method, guided by a model of composite approaches of poverty alleviation in Islam, integrated Islamic commercial and social finance (IICSF) and crisis management of Umar bin Khattab, to construct various programs and/or policy actions toward economic recovery in Indonesia. Findings The results show that ISF with its instruments, especially zakat, infaq and waqf could help the government and the economy to recover from the crisis. The proposed solutions include: save lives, including medical assistance using zakat-infaq and health-care waqf using waqf; save households, by creating a social safety net and graduation program using zakat-infaq; save businesses, especially micro-small enterprises (MSEs), through financial and business assistance (especially digital marketing) leveraging zakat-infaq-waqf and save financial institutions, especially micro-small financial institutions, by the development of cash waqf and the adoption of fintech and IICSF, especially in Islamic financial institutions targeting MSEs. Research limitations/implications This study is exploratory in nature, which needs further investigations using more sophisticated qualitative and/or quantitative methods. Practical implications If the above programs using ISF instruments are implemented, the economic surplus would be re-established and the acceleration of economic recovery can be realized. Social implications The successful adoption of ISF could at the same time reduce poverty, accelerate MSEs development and improve equitable well-being. Originality/value The Covid-19 pandemic has caused health, economic and social problems, which must be solved holistically, including ISF within IICSF.