THE ROLE OF ISLAMIC SOCIAL FINANCE AS AN ALTERNATIVE

SOLUTION TO GLOBAL RECESSION RECOVERY

This scientific work was compiled and submitted to fulfill the assignment for the
Final Semester Examination in the Management Course

Lecturer of Courses : Ust. Kurnia Rahman Abadi, S.E,M.M.

Arranged by:
Rizky Hari Aroby
422021411077

ISLAMIC ECONOMIC STUDY PROGRAM

FACULTY OF ECONOMICS AND MANAGEMENT
UNIVERSITY OF DARUSSALAM GONTOR
PONOROGO
2021/1442
 THE ROLE OF ISLAMIC SOCIAL FINANCE AS AN ALTERNATIVE
SOLUTION TO GLOBAL RECESSION RECOVERY

Rizky Hari Aroby

422021411077
UNIVERSITY OF DARUSSALAM GONTOR
e-mail: rizky.hari.aroby1077@mhs.unida.gontor.ac.id

ABSTRACK

The current economic recession is happening globally. All countries are in

recession. This is the impact of the COVID-19 pandemic which is influenced by the
efforts of all countries to contain the spread of this virus, such as social distancing.
Indonesia itself experienced three recessions. The indicators that cause economic
recession include unemployment, industrial production, and retail sales. In addition
to the government's efforts to overcome the economic recession in this country, the
concept of Islam can of course also be an alternative to recovering from global
economic turmoil. This study raises the issue of "how is the role of Islamic social
finance to restore the economy, especially in this pandemic era". In accordance with
the formulation of the problem in this study. So, the purpose of this study is to find
out the role of Islamic economics as an alternative solution to the global recession.
This research method also uses a qualitative description, which is to analyze the
global economic recession due to current problems, especially the pandemic and at
the same time linking it to the role of the Islamic economy. The solutions offered by
Islamic economics include: first, the distribution of direct assistance from zakat,
infaq, alms. Second, an increase in cash waqf with cash waqf schemes, productive
or linked waqf. Third, temporary giving. And fourth, the provision of business
capital with loans that do not take any results but must still be returned.

PRELIMINARY

Background
In 2018-2019 the world economy experienced a slowdown in growth until
the second quarter of 2020 even experienced a minus. So, this has an indication that
the economic influence of developed countries is also experiencing a slowdown in
economic growth. In addition, in general, the global economy also experienced
many economic turmoil.
 In the last two years, the world has experienced successive declines in the
economic sector. Based on a report from BPS1 that the economic turmoil that
occurred, there is a shift in the economic structure which implies the implementation
of domestic-oriented regulations by several countries, the digital economy which is
starting to develop rapidly, the high volatility of capital flows, and the integration of
integrated policies.
It can be said that the economic recession is one of the impacts that caused
the current economic turmoil, thus the government has made several efforts to
overcome this recession.
In addition to the efforts of each government, the concept of Islam can also
be relied upon as an alternative to overcome global economic turmoil. According to
Ahmad Juwaini2, “The current economic system only focuses on the market, while
with the real sector the state is able to cope with the impact of this pandemic. And
the Islamic economic system focuses on that sector”.
In addition, Indonesia is the largest country whose majority of the population
adheres to Islam. So to realize the program or Islamic economic system is not so
difficult. Coupled with the continued development of Islamic investment from year
to year. Therefore, from what has been described above the author wants to research
about, "The role of Islamic social finance for economic recovery".

Formulation of the problem

This study discusses issues related to, "What is the role of Islamic social
finance for economic recovery".

Research purposes
In accordance with what is stated in the formulation of the problem, in this
study, this study aims to determine the role of Islamic social finance for economic
recovery.

Research methods
This research method uses a qualitative description, namely by analyzing the
global economic recession, especially due to the pandemic as well as linking it with

1
Badan pusat statistic “laporan perekonomian Indonesia 2020”, katalog BPS: 919907

2
Ahmad Fikri Noor, “Ekonomi Syariah Dukung Pemulihan Sektor Riil”,
(https://www.republika.id/posts/7129/ekonomi-syariah-dukung-pemulihan-sektor-riil, diaksesOct 2020, 11:02
WIB)
the role of the Islamic economy. The references used are related to the economic
recession and responses in the perspective of Islamic economics. This paper also
provides an alternative solution for the current economic recession by maximizing
the role and variables of the Islamic economy. Given the limitations of the material,
the author will describe the results of the study with conclusions from several
sources and related articles and journals.

DISCUSSION

Causes of general economic recession

An economic recession is an event of a decline in a country's economic

growth that occurs for at least two consecutive quarters3. This is due to the lack of
balance between production and consumption, such as high production while
consumption is lacking, this will indirectly lead to a buildup of inventories.
An economic recession that occurs in a country will cause a negative
influence on each other's economic activities, for example, decreased investment
will affect the amount of production which will also decrease. This decline has an
impact on increasing the unemployment rate and has an impact on the level of
people's purchasing power consumption which also decreases. So the company
experienced a decrease in revenue.
The decline in all economic activities such as employment, corporate profits
and investment can be caused by a recession. The recession that occurred in
Indonesia was one of the turmoils of the American recession through the stock
exchange and the liquid sector4. This is because America is a country that exports to
Indonesia, by 10%, so that some companies in Indonesia will weaken because of
their dependence on exports to America5.
In general, a recession can also be caused by the stock sector, the value of
gold, and debt securities6. In the capital market sector, the pandemic has caused

3
Zulbiadi. “Penyebab dan EfekResesiEkonomi Dunia BahayaKrisis, (https://analis.co.id/penyebab-dan-efek-
resesi-ekonomi-dunia-bahaya-krisis.html, October 13, 2019)

4
Hairunnisa”peranan ekonomi syariah sebagai solusi alternative resesi ekonomi global 2020”.

5
Guru Ekonomi, engertianResesi (https://sarjanaekonomi.co.id/pengertian-resesi/, 08-07-2020, Akses 19-
11-20)

6
ChairulIksan Burhanuddin dan Muhammad Nur Abdi. “AncamanKrisisEkonomi Global Dari
DampakPenyebaran Virus Corona (Covid-19)”. Volume 17 Nomor 1 Maret 2020. AKMEN e-ISSN : 2621-
4377 & p-ISSN : 1829-8524
investors to leave the global stock market, which has caused the capital stock market
to come under intense pressure. Besides that, gold trading, originally gold as an asset
with minimal risk, turned into an investment platform that was quite attractive, so
gold trading continued to surge. Recession can also be caused by gross product
experiencing a fall in income, limited employment opportunities, retail sales and the
manufacturing industry is experiencing contraction.
The dynamics of the Indonesian economy during a recession experienced a
slowdown in which many layoffs occurred which caused people to lose their jobs
and increase the unemployment rate. Companies were on the verge of bankruptcy
and the state's output had fallen significantly. In addition, the state debt continues to
swell slowly so as to stimulate the country to experience high inflation due to
controlling interest rates. But when interest rates are controlled too high it will affect
other economic activities.

Islamic Economics: Definition and characteristics

Umar Chapra expressed his opinion, Islamic economics is a science that

implements the welfare of mankind by distributing scarce resources in the form of
assets, without neglecting individual freedom, balancing macroeconomic and long-
term ecology, or weakening family and social solidarity and the moral network of
society7.
Adiwarna explained that the principles of Islam in the economy must meet
the principles, including sharia in Islamic economics, sharia in legislation and sharia
in society. If these three principles can be applied, then a good Islamic economic
model and people's economic equality will be realized8.
According to Khursid Ahmad, Islamic economics is a systematic effort to be
able to understand economic problems and human behavior and the relationship
between them from an Islamic point of view9.
There are several problems and challenges that must be faced by Islamic
economics, including the lack of Islamic economics experts who have quality in

7
Rifki Syuja‟ Hilman,“Ekonomi Islam sebagai Solusi Krisis Ekonomi”. Falah Jurnal Ekonomi Syariah,
Vol.2, No.2, Agustus 2017.
8
https://akurat.co/rahmah/id-1206256-read-3-hal-penting-dalam-ekonomi-islam-menurut-pakar-
ekonomi-syariah. Adi Warman Karim dalam Webinar Ekonomi Islam. Lufaedi. 31 Agustus 2020 akses
14:30.

9
Gustani, “ Definisi ilmu ekonomi islam menurut para ahli” , (https://www.gustani.id/2015/07/definisi-ilmu-
ekonomi-islam-menurut.html. 27 Juli 2017. )
mastering Islamic economics in an integrative manner including modern economics,
then there is still a test of the credibility of the economic system and its finances,
regulatory instruments, laws and regulations. policy. There are still limited
universities that provide Islamic economics teaching and the lack of training
institutions and consultancies in the field of Islamic economics and finance, the role
of government, both executive and legislative, and the low development of the
Islamic economy10.

Causes of Global Economic Recession

In general, the COVID-19 pandemic is the main impact on the current

economic turmoil. Many world economic experts state that the world economy is
experiencing a global recession tsunami. As a result of this pandemic, several
countries have been forced to issue policies to limit human activities to policies to
lock down. The policy was issued with the hope of reducing the spread of COVID-
19, but the impact of this policy is the weakening of economic performance.
The policy of limiting economic activities hampers the production and
distribution of goods, which are not only focused on domestic activities, but also on
export and import activities. In addition, massive budgets for overcoming the health
crisis must also be issued by each country, especially those with high victims in that
country. The IMF announced that world economic growth will contract by -3.0% in
2020. In addition, the IMF also projects that the economic growth of developed
countries is estimated at -6%, while for developing countries, the economic
contraction will not be as severe as that experienced by developed countries. This is
due to the economic contraction in developing countries driven by strong economic
performance in the Asian region.
The global economic recession has been most affected by the COVID-19
pandemic. When viewed from an economic point of view, there are two sides to
economic problems, namely from the supply and demand side. From demand, the
problem is that state consumption has decreased, transportation and trade have
stagnated. Meanwhile, from the point of view of supply, the problem is that there is
a contraction in worker or labor productivity, reduces investment and funding
activities, then global supply is disrupted (Global Value Chain)11.

10
Tira nur fitria, “ kontribusi ekonomi islam dalam pembangunan ekonomi nasional “, jurnal ilmiah ekonomi
islam Vol.02 No.03, November 2016.

11
DewiWuryandani, “DampakPandemi Covid-19 terhadapPertumbuhanekonomi Indonesia 2020 dan
Solusinya”, BidangEkonomi dan KebijakanPublik, Vol. XII No.15, Agustus 2020.
 By 30% reducing global trade and investment flows, in addition to increasing
financial market volatility by 215%, from this data it can be estimated that 195
million people will lose their jobs, while around 420-580 million people will fall
into poverty. In the social field, pandemics are a trigger for conflict in society12.

Islamic solution in tackling global economic recession

Covid-19 has had the impact of decreasing economic activity from both the
supply and demand sides. This shows that not only causes shocks to real economic
fundamentals, but can also damage the smooth functioning of the market
mechanism. There is a contraction in supply so that there is a contraction on the
demand side which creates an economic surplus.
The conditions described earlier raise the question of what is the solution to
the current global economic conditions? According to Ahmad Juwaini, director of
financial inclusion, religious social funds and sharia microfinance, the National
Committee for Islamic Economics and Finance (KNEKS), Islamic economics
focuses on the market compared to other economies that have been run only in the
real sector. In addition, the Islamic finance industry survives because it has a positive
influence on the calm, stability and patience of human resources working in the
Islamic banking industry.
Islamic economics also contributes to the country's economic stability in
various ways in Islamic economics and finance. These methods include giving infaq,
alms, zakat, waqf in order to increase the sense of humanity, eliminate miserliness,
materialism, grow a sense of calm, set aside wealth and other aspects of life for
people who need it more.
Among the solutions that can be offered within the framework of Islamic economic
and social finance concepts and systems are:
First, the distribution of direct cash assistance from zakat, infaq, and alms,
both from zakat collection units and volunteers from the community. Facing the
current situation, it is not only the government that is moving, but the community
must also move and contribute according to their respective abilities. In this context,
it takes the sacrifice of the rich and the patience of the less fortunate or the more
fortunate to help those who are less fortunate13.

12
Mohamad IkhsanModjo, “Memertakan Jalan PenguatanekonomiPascaPancemi”, The Indonesian Journal odf
Development Planning, Vol IV No.2, Juni 2020.

13
Linge, A., Filantropi Islam Sebagai Instrumen Keadilan Ekonomi (Jurnal Perspektif Ekonomi
Darussalam, Vol . 1, No. 2, 2015), h. 154-171.
 This is an Islamic economic philanthropy scheme that has great potential for
the community's economy. But unfortunately Muslims are still not aware of zakat.
This is proven by the income of zakat money to baznaz which is still far from what
is expected. For this reason, strengthening the campaign for zakat, infaq, and alms
funds can continue to be improved by several efforts such as:
1. Make the mosque a center for baitul mall for the surrounding community and
must register as a zakat collection unit (UPZ) under the zakat management
organization (OPZ).
2. Literacy related to the calculation of zakat can be strengthened by
establishing zakat centers in mosques and on campuses.
3. There is a need for a national and large-scale solidarity fund movement that
can be directly led by the president of the Republic of Indonesia and
supported by all official social media of the government and the public.

Second, the strengthening of cash waqf, productive waqf and sukuk linked
waqf needs to be improved. The Indonesian waqf agency (BWI) needs to work
closely with Islamic financial institutions to promote this waqf scheme, which in
turn can be used for the construction of various waqf-based infrastructures. Waqf
management must be carried out in a productive and sustainable manner,
considering the reality that there are many waqf assets, but they are not even able to
run productively, so they are not maximally useful14.
Third, support for superior business capital at a critical time. In the midst of
a crisis, not a few business sectors or micro, small and medium enterprises (MSME)
are struggling to survive. This type of business is very difficult to survive because
of limited capital.
The existence of MSME entrepreneurs, especially traders in traditional
markets, is a manifestation of the economic life of most Indonesian people. This
position has placed traditional market traders as the main thing that must be
considered, especially in terms of capital.
Fourth, the business capital described above can also be followed by a
qardhul hasan loan. Qardhul hasan in Islamic economics is a loan that does not take
any benefits but is still emphasized to be repaid15. This scheme is one of the most

14
Sakni, A. S., Konsep Ekonomi Islam dalam Mengentaskan Kesenjangan Sosial: Studi atas Wacana
Filantropi Islam dalam Syari’at Wakaf (Jurnal Ilmu Agama: Mengkaji Doktrin, Pemikiran, Dan
Fenomena Agama, Vol. 14, No. 1, 2013), h. 151-166.

15
Sari, S. P., Pengaruh Pembiayaan Qardhul Hasan Terhadap Peningkatan Pendapatan Usaha Mustahik Zakat
(Studi Kasus Dompet Peduli Umat Daarut Tauhiid Cabang Bogor) (AL-INFAQ, Vol. 4, No. 1, 2015), 57-93.
important schemes in the Islamic economic system and the most supportive for
economic recovery.
Fifth, the Islamic economic system as a system that is full of values as well
as a guide from the creator is believed to be able to realize productive economic
activities in the context of justice.
In addition, there is an Islamic economic community organization as a place
that aims to become a pillar that is followed as an example for efforts to develop and
implement an economic system and Islamic business ethics in Indonesia.
Sixth, the development of Islamic financial technology to facilitate online
market players in an Islamic manner, while at the same time efforts are also made to
increase focus on social finance (zakat, infaq, alms, and waqf) in addition to
commercial finance.

CONCLUSION

As a country with the highest Islamic majority in the world, Muslims can
give their best role in various forms or models of philanthropy in Islamic finance
and economics, especially during times of this pandemic. The role of Islamic finance
is highly expected in order to contribute to the recovery of these shocks.
Islamic economics contributes to the country's economic stability in various
ways in Islamic economics and finance. These methods include giving infaq, alms,
zakat, waqf in order to increase the sense of humanity, eliminate miserliness,
materialism, grow a sense of calm, set aside wealth and other aspects of life for
people who need it more.
REFERENCES

Badan pusat statistic “laporan perekonomian Indonesia 2020”, katalog BPS:

919907
Ahmad Fikri Noor “Ekonomi Syariah Dukung Pemulihan Sektor Riil”,
(https://www.republika.id/posts/7129/ekonomi-syariah-dukung-pemulihan-sektor-
riil, diaksesOct 2020, 11:02 WIB).

Zulbiadi. “Penyebab dan EfekResesiEkonomi Dunia BahayaKrisis,

(https://analis.co.id/penyebab-dan-efek-resesi-ekonomi-dunia-bahaya-krisis.html,
October 13, 2019)

Hairunnisa”peranan ekonomi syariah sebagai solusi alternative resesi ekonomi

global 2020”.

Guru Ekonomi, engertianResesi (https://sarjanaekonomi.co.id/pengertian-resesi/,

08-07-2020, Akses 19-11-20).

ChairulIksan Burhanuddin dan Muhammad Nur Abdi.“AncamanKrisisEkonomi

Global Dari DampakPenyebaran Virus Corona (Covid-19)”. Volume 17 Nomor 1
Maret 2020. AKMEN e-ISSN : 2621-4377 & p-ISSN : 1829-8524

Rifki Syuja‟ Hilman,“Ekonomi Islam sebagai Solusi Krisis Ekonomi”. Falah

Jurnal Ekonomi Syariah, Vol.2, No.2, Agustus 2017.

https://akurat.co/rahmah/id-1206256-read-3-hal-penting-dalam-ekonomi-islam-
menurut-pakar-ekonomi-syariah. Adi Warman Karim dalam Webinar Ekonomi
Islam. Lufaedi. 31 Agustus 2020 akses 14:30.

Gustani, “ Definisi ilmu ekonomi islam menurut para ahli” ,

(https://www.gustani.id/2015/07/definisi-ilmu-ekonomi-islam-menurut.html. 27
Juli 2017 ).

Tira nur fitria, “ kontribusi ekonomi islam dalam pembangunan ekonomi nasional
“, jurnal ilmiah ekonomi islam Vol.02 No.03, November 2016.

DewiWuryandani, “DampakPandemi Covid-19 terhadapPertumbuhanekonomi

Indonesia 2020 dan Solusinya”, BidangEkonomi dan KebijakanPublik, Vol. XII
No.15, Agustus 2020.
Mohamad IkhsanModjo, “Memertakan Jalan PenguatanekonomiPascaPancemi”,
The Indonesian Journal odf Development Planning, Vol IV No.2, Juni 2020.

Linge, A., Filantropi Islam Sebagai Instrumen Keadilan Ekonomi (Jurnal

Perspektif Ekonomi Darussalam, Vol . 1, No. 2, 2015), h. 154-171.
Sakni, A. S., Konsep Ekonomi Islam dalam Mengentaskan Kesenjangan
Sosial: Studi atas Wacana Filantropi Islam dalam Syari’at Wakaf (Jurnal Ilmu
Agama: Mengkaji Doktrin, Pemikiran, Dan Fenomena Agama, Vol. 14, No. 1,
2013), h. 151-166.

Sari, S. P., Pengaruh Pembiayaan Qardhul Hasan Terhadap Peningkatan

Pendapatan Usaha Mustahik Zakat (Studi Kasus Dompet Peduli Umat Daarut
Tauhiid Cabang Bogor) (AL-INFAQ, Vol. 4, No. 1, 2015), 57-93.