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Assisting Poor & Needy in the Midst of the Pandemic using Modes of Islamic Social Finance.

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Islamic finance has become popular today in the Maldives. The population had become well acquainted with modes of Islamic commercial finance as those modes have been institutionalized in the formal finance sector. However, like in other parts of the world, the pandemic has made us realized in the Maldives that it is not sufficient only to have the modes of Islamic commercial finance institutionalized; but there is need to activate and institutionalize Islamic social finance modes as well. In the midst of the pandemic, due to the containment measures taken by the governments to protect human race from becoming extinct, it has been reported that the world poverty clock has turned back. What has been witnessed in the midst of this unprecedented pandemic is that overnight people have become poor. This domino effect caused by the pandemic in a nutshell is shown in the figure below. As such, the poor and needy segment of the population needs financial assistance that is not compatible to be provided using the modes of Islamic commercial finance. Social finance is an approach to managing investments that generate financial returns while including measurable positive social and environmental impact.

What is Islamic Social Finance?

Islamic social finance is a branch of Islamic finance that offers product and services not for profit. The objectives of Islamic social finance are to achieve social justice via redistribution of wealth. The list of Islamic social finance institutions and tools are not exhaustive as it is an area which is still developing. Islamic social finance is also known as Islamic social safety nets or charitable sector of the economy.  It is imperative to note that Islamic social finance is different from Islamic commercial finance of which the objective is different even though some of the instrument/contract used could be same.

Modes of Islamic Social Finance

The modes of Islamic social finance include: zakat; sadaqat or infaq; waqf; takaful; and microfinance.

  • Zakat: A compulsory payment paid every year by those who are eligible for the benefit of those who are stated in Quran, 9:60.
  • Sadaqat or Infaq: A non-compulsory payment given to assist poor and needy to seek pleasure of Allah (SW).
  • Waqf: A non-compulsory irrevocable which means a permanent contribution of one’s wealth whether cash or in kind to seek pleasure of Allah (SW) for social purpose.
  • Takaful: A concept based on mutual assistance or Ta’aawun and donation or Tabarru where joint guarantee to one another is by provided by a group of people who agree to participate with each other who is known as contributors by contributing an amount of money as donation to help each other from damages caused due to happening of future unfortunate events to any participant of the group by helping them using the donation made by the participants of the group.
  • Microfinance: It is providing finance to those who are poor financing via non-profitable means such as interest free loan (qard hasan) or via profitable means such as mudharabah or musharakah to assist them.

 

Ways in which Islamic Social Finance can be utilized to help the needy and Poor

In the midst of the pandemic it has been realized that in different countries in the world, modes of Islamic finance have been activated to assist poor and needy via shared responsibility. Below listed are some ways in which in the Maldives, modes of Islamic social finance could be activated to assist poor and needy.

  • Revise the criteria of poor and needy to provide opportunity to receive zakat assistance to those whose income has been affected adversely due to the pandemic.
  • Even after giving of the debt moratorium to those who have taken financing facilities from financial institutions, but due to loss of income who are unable to pay their debts ought to be assisted by zakat or sadaqat or infaq.
  • A special waqf fund to assist the poor and needy in the society need to be created and this needs to be initiated by the private sector.
  • Islamic microfinance schemes need to be introduced to assist poor and needy to provide them with opportunities to venture into business with interest-free loans and other shariah compatible modes of financing.

 

Conclusion

The pandemic has provided with the opportunity to re-strategize our economic and financial activities. Therefore, it is imperative to innovate ways to utilize Islamic social finance tools and institutions to help those who are poor and needy. As such, the required legal, regulatory, governance and technology infrastructure need to be developed. Definitely through implementation of Islamic social finance tools and institutions, the socio-economic justice will be achieved. From Maqasid al Shariah (objectives of Islamic law) perspective, it is mandatory for one to help each other in protecting one another from hardship as one can achieve success in this world and hereafter.

 

Dr. Aishath Muneeza is an Associate Professor at the International Center for Education in Islamic Finance. 

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China's National Day Supplement

Remarks on Celebrating the 73rd Anniversary of the Founding of the People’s Republic of China & the 50th Anniversary of the Establishment of the Diplomatic Relations between China and Maldives

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This year marks the 73rd anniversary of the founding of the People’s Republic of China. Over the past 73 years, earthshaking changes have taken place in China.

Since the 18th CPC National Congress in 2012, the Central Committee of the Communist Party of China with Comrade Xi Jinping at its core has coordinated the overall strategy of the Great Rejuvenation of the Chinese Nation and the great change that has not happened in a century, have solved many tough problems that were long on the agenda but remained unsolved, accomplished many things of vital importance and long-term significance, and withstood the test of various risks and challenges at home and abroad. The Path of China’s development becomes wider and wider, the Governance of China becomes more and more mature, and the Theory of China becomes more and more prevailing. The Chinese people have successfully built a moderately prosperous society in all respects and fulfilled the first centenary goal. We are embarking on a new journey to fully build a modern socialist country, march toward the second centenary goal, and advance toward the grand goal of realizing the great rejuvenation of the Chinese nation.

This year is of great historical significance in the development of the CPC and China, as the 20th CPC National Congress will be convened on 16th of October. This Congress will, in response to the expectation of all the Chinese people, set well-conceived goals and tasks for China’s development in the next five years and beyond, and it will draw an overarching plan for China’s future development. Having reached a new historical starting point, China will follow the Chinese path to modernization to achieve the rejuvenation of the Chinese nation. China will work with other countries to make every effort for peace and development, shoulder the responsibility for solidarity and progress, build a community with a shared future for mankind, and embrace an even better world.

At present, the COVID-19 pandemic has kept resurfacing. Global security faces uncertainty. Global economic recovery is fragile and unsteady, and various risks and crises are emerging. The world has entered a new phase of turbulence and transformation. Changes unseen in a century are accelerating. At the same time, the world continues to move toward multi-polarity; economic globalization is deepening, and our societies are becoming increasingly digitized and culturally diversified. Indeed, countries are becoming ever more interconnected and interdependent. Peace and development remain the underlying trend of our times. Around the world, the people’s call for progress and cooperation is getting louder than ever before.

In response to the common aspiration of the international community for peace and development, and make up the global governance deficit, President Xi Jinping proposed the Global Development Initiative at the 76th session of the UN General Assembly. Putting the people at the center, this initiative is a rallying call to refocus attention of the international community on development and build a global community of development. At the recent High-level Dialogue on Global Development he chaired, President Xi Jinping announced several dozen concrete major steps to implement this initiative, generating strong impetus for accelerating the implementation of the 2030 Agenda for Sustainable Development.

President Xi Jinping proposed the Global Security Initiative at the Boao Forum for Asia Annual Conference 2022. He called on the international community to pursue common, comprehensive, cooperative and sustainable security, to respect the sovereignty and territorial integrity of all countries, to abide by the purposes and principles of the UN Charter, to take the legitimate security concerns of all countries seriously, to peacefully resolve disputes through dialogue and consultation, and to maintain security in both traditional and non-traditional domains. By putting forward this initiative, he has contributed China’s vision to reducing the peace deficit facing humanity and provided China’s input to meeting global security challenges.

As China has one-fifth of the global population, its march toward modernization has important, far-reaching significance for the world. The path that China pursues is one of peace and development, not one of plunder and colonialism; it is a path of win-win cooperation, not one of zero-sum game; and it is one of harmony between man and Nature, not one of destructive exploitation of resources. We will continue to contribute our input to meeting the challenges facing human development, and make our contribution to creating a new form of human advancement.

This year also marks the 50th anniversary of the establishment of diplomatic relations between China and the Maldives. Over the past half a century, China-Maldives relations have withstood the test of international vicissitudes and become more mature and stable. China and the Maldives have been upholding the spirit of friendship and neighborliness, treating each other as equals, conducting cooperation for development, supporting each other with mutual assistance and tiding over difficulties together. China highly appreciates the Maldives’ long-standing understanding and support for China’s just claims on issues concerning China’s core interests and major concerns, and China also supports the Maldives in safeguarding its sovereignty, independence and national dignity, and will continue to uphold justice for the Maldives at the international arena. The Maldivian government has a longstanding and firm commitment to the one-China principle. The China-Maldives relations have become a model of friendly exchanges, mutual benefit and win-win cooperation between countries with different systems and cultures in international arena.

In recent years, under the strategic guidance of the leaders of the two countries, China-Maldives relations have maintained a good momentum of steady development. In September 2014, Chinese President Xi Jinping paid a historic state visit to Maldives and the two sides agreed to establish future-oriented all-round friendly and cooperative partnership, lifting the China-Maldives relations to a new level. In July 2021, Chinese President Xi Jinping had a phone call with Maldivian President Ibrahim Solih and reached important consensus on deepening and expanding exchanges and cooperation in various fields between the two countries, setting the direction for the future development of the bilateral relations. In January 2022, Chinese State Councilor and Foreign Minister Wang Yi paid a successful visit to Maldives with fruitful outcomes, opening a new chapter in China-Maldives relations. Maldivian Foreign Minister Abdulla Shahid visited China twice over the past year, which enhanced the mutual trust and friendship between the leaders of the two countries, and laid a sound foundation for the future development of bilateral relations.

As an all-round friendly and cooperative partner, China has been always strongly supporting the Maldives to speed up economic and social development and improve self-development capability. Recent years have witnessed fruitful results on jointly building the “Belt and Road” by China and Maldives. The China-Maldives Friendship Bridge is a landmark project of the “Belt and Road” Initiative. Since it opens to traffic 4 year ago, the bridge has witnessed over 100 million crossings by the local people and has dramatically promoted the sustainable development of Maldivian economy and society. As foreign minister Abdulla Shahid said the China-Maldives Friendship Bridge built with China’s assistance had brought enormous changes to the country and greatly accelerated the economic development process of the Maldives and befitted the Maldivian people. So far Chinese companies has completed more than 11,000 social housing units, which have contributed a lot in the improvement of living conditions of thousands and thousands of Maldivian families. Power generation and power grid connection built by Chinese companies meet 80% of all electricity demand of the residents and enterprises in the Greater Malé. Expansion and Upgrading of Velana International Airport Project will further promote the development of Maldivian tourism. The great contributions made by the Chinese side to the development of Maldivian economy and society will further enhance the solid friendship between the two peoples.

Looking into the future on the occasion of the 50th anniversary of diplomatic ties, the two countries should continue with the past and open up the future, promote all-round cooperation to a new high and write a new chapter for the friendly and mutually-beneficial cooperation with a more far-reaching eyesight and broader vision. In this regard, I would like to put forward the following 4 suggestions.

Firstly, both sides should blueprint and steer the future development of China-Maldives relations under the guidance of the important consensus reached by the leaders of the two countries.

Secondly, both sides should adhere to the valuable experience to ensure the steady and smooth development of the bilateral relations. Both sides should continue to respect each other, treat each other as equals, help each other with sincerity as well as support each other on the issues of our respective core interests and major concerns. China will continue to support Maldives in safeguarding its national sovereignty and territorial integrity and in pursuing an independent foreign policy. We believe that the Maldivian government will uphold its longstanding commitment to the one-China principle and firmly support China to defend its core interests.

Thirdly, both sides should deepen mutually beneficial cooperation in full scale so as to benefit the people of the two countries. In this regard, both sides should continue to push forward Belt & Road cooperation with high quality, speed up major projects and tourist cooperation. I hope the Maldivian side could finish ratification of China-Maldives FTA as early as possible in order to boost the post Covid-19 recovery of the Maldivian economy. We should explore new areas of cooperation in telecommunication, big data and marine economy. We need coordinate closely in international affairs to safeguard the international system with the United Nations at its core and the international order based on international law.

Finally, both sides should expand the people-to-people and cultural exchanges. We welcome more and more Maldivian youngsters to further their study in China. A Chinese language center based in Villa College has been set up now, which will further facilitate the Maldivians especially youngsters to learn Chinese language and culture. The visa exemption agreement of the two countries has come to effect. We believe that as the Covid-19 pandemic situation eases and the direct flights resume in the future, the people-to-people exchanges between the two countries will increase, which will further promote the traditional friendship of the two countries.

History has proved and will always prove that maintaining good-neighborly friendly relations with mutual benefit and win-win cooperation between China and the Maldives accords with the fundamental interests of the two countries and peoples, and benefits the peace and development of the region and beyond as well. We believe that with the 50th anniversary of our diplomatic ties as a new starting point, China and the Maldives will enhance mutual trust, expand cooperation and deepen friendship, jointly embark on a new journey of China-Maldives relations and promote the future-oriented all-round friendly and cooperative partnership between China and Maldives to a new level.

Finally, I’d like to take this opportunity to wish China enjoy prosperity and its people wellbeing and wish China-Maldives relations flourish in the future.

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