The IFSB Issues Four New Working Papers on Assessing the Effectiveness of COVID-19 Policy Responses across the Islamic Banking, Islamic Capital Markets, and Takaful Industry
Date posted: 12 January 2022
12 January 2022, Kuala Lumpur - The Islamic Financial Services Board’s (IFSB) today issued the 20th, 21st, 22nd, and 23rd research papers in the IFSB Working Paper series.
WP-20 focuses on the role of social-impact sukuk in the recovery phase of the COVID-19 pandemic. The paper expounds on the underlying philosophy of Islamic finance to remove hardship and promote shared prosperity through various means especially social-impact sukuk. The paper analyses and justifies the potential role of social impact ṣukūk in the recovery phase from the perspective of various stakeholders including investors, issuers, regulators, and standard setting bodies. This is based on the extant literature, academic assessment and notable examples and practices of the use of social impact ṣukūk in mitigating the impact of COVID-19 across many jurisdictions.
WP-21 assesses the effectiveness of COVID-19 policy responses in the Islamic capital markets industry. The paper, which adopts a conceptual approach also considers the experiences and measures adopted by the key multilateral and international organisations, as well as the policy responses adopted across IFSB member jurisdictions, with an emphasis on their relative effectiveness. The paper provides an outlook of the ICM post-COVID-19 pandemic and the opportunities the pandemic offers to the industry during the recovery phase.
WP-22 focuses on developments in the takāful segment of the Islamic financial services industry during the COVID-19 pandemic. Specifically, the paper considers the COVID-19 experiences and measures adopted by both operators and regulators across IFSB member jurisdictions, with an emphasis on their relative effectiveness. Based on survey responses provided by market players and regulators, and views of key industry leaders and experts, the paper provides insights into the outlook for the Takaful industry with focus on both the challenges and opportunities that COVID-19 offers to the industry during the recovery phase.
WP-23, based on data from the IFSB’s Prudential and Structural Islamic Financial Indicators (PSIFIs) database empirically assesses the effectiveness of the various COVID-19 policy measures adopted in the Islamic banking industry across jurisdictions. Specifically, the paper aims to determine if the various monetary, financial and fiscal policy support measures used have resulted in the intended outcome of ensuring that Islamic banks remain resilient and complement the functioning of the economy by providing financing to the real economy during the ongoing pandemic. The paper also investigates whether Islamic banks have used the flexibility provided for in the IFSB standards and guidelines to adapt to the peculiarities of the COVID-19 pandemic. The paper provided indicative evidence of the effectiveness of the various policy measures, but also noted Islamic banks have either generally not needed to dip into their buffers or may have been hesitant to use them during the pandemic. The paper also offers suggestions for scheduling the phasing out of policy support measures. The implications of the findings and suggestions for the resilience and stability of the Islamic banking industry are also provided in the paper
The IFSB Secretary-General, Dr. Bello Lawal Danbatta stated that “the issuance of the IFSB working papers takes place at a time when the dynamics of the pattern, effect, and duration of the COVID-19 pandemic remain unclear due the increasing cases of the Omicron variant.” He stated further that “notwithstanding, it is gladdening to note that across sectors, the findings from the working papers indicate the Islamic financial services industry have demonstrated resilience and the capacity to complement various COVID-19 induced policy support measures across jurisdictions, thus supporting economic activity rather than aggravating the economic crisis.”
The IFSB Working Paper Series are available for download from the IFSB website, www.ifsb.org.
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