Editorial

Abstract

In the Name of Allah, Most Gracious, Most Merciful. The Islamic finance industry has to be ever ready to face any crisis impacting the world. Being part of the wider global finance market, Islamic finance is shaken every time there is any major impact on its conventional counterpart. The present coronavirus disease outbreak (COVID-19) is expected to downgrade the growth forecast of many economies for 2020 and is sparking uncertainty for businesses. Economic sectors such as tourism, trade, logistics, capital markets, aviation and the cruise industry have started feeling the brunt of the impact. S&P Global reports that the biggest loser in the S&P500 in February 2020 was Royal Caribbean Cruises, which recorded a 31.30% fall in share price. While the early start of 2020 saw a promising outlook for Islamic finance, after a few years of lack lustre growth, this disease outbreak is now raising fears because of the disastrous effect it may have on equity market performance, in particular, and the general costs it would impose on the industry.

The spread of COVID-19 in key Islamic finance jurisdictions such as Malaysia, Iran and the Gulf countries spells both opportunities and challenges for the Islamic finance industry. Islamic Finance News, in its weekly market round-up 22-28 February, reported that Iran Insurance and Saman Insurance now cover coronavirus within their range of insurance products. In Malaysia, many conventional and Islamic banks have started offering financial relief to both individual and business customers to ease their short-term financial constraints in the face of the current COVID-19 situation. The relief packages include, among others, restructuring and rescheduling of financing, allowing temporary deferment of loan repayments. On the down side, we note that many international Islamic finance conferences scheduled for the first half of the year have now been postponed. Also, just as the disease has impacted other industries, it will negatively impact the ḥalāl economy as well. The ḥalāl economy has been identified by many as the propelling axis of future growth for Islamic finance, and negative impact on it will have a negative knock-on effect on the prospects for Islamic finance growth.