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Funding Covid-19 Economic Stimulus Through Islamic Social Finance

The COVID-19 pandemic is an unprecedented humanitarian challenge which requires innovative solutions. One apparent challenge among governments is to come up with appropriate funds to finance economic stimulus packages. Such stimulus packages are necessary for the protection and wellbeing of the people and to ensure that the economic operations remain intact. By looking into Islamic economics, various solutions can be explored as offered through Islamic social finance instruments such as Zakat, Waqf, and Sadaqah, as well as its innovative solutions specifically available from the capital market sectors. This paper explores the potential development of an Impact-Waqf SRI sukuk for funding economic stimulus packages, with special focus to Malaysia. This paper proposes a solution in achieving such purpose by referring to the Impact-Waqf SRI sukuk, either based on temporary or permanent cash Waqf structure. Returns of investments to investors ultimately depend on the social impact and key performance indexes (KPIs) as achieved from the economic stimulus packages. It is found that the Impact-Waqf SRI sukuk can be issued either by the government or government-linked company (GLC) and economic stimulus packages can be offered to institutional as well as retail sectors. An option can be given to the investors to waive-off their claims on the capital and returns. Consequently, the government can offer tax rebates or coupons which are equivalent to the value of the waived-off investment.