An Artificial Intelligence and NLP based Islamic FinTech Model Combining Zakat and Qardh-Al-Hasan for Countering the Adverse Impact of COVID 19 on SMEs and Individuals

Abstract

Pursose: The ongoing Corona virus (COVID 19) pandemic has already impacted almost everyone across the globe. The focus has now shifted from spread of the disease to the economic consequences it will bring to the society. The shortage of production will result into the shortage of supply and consequently will end as loss of jobs and employment for millions of people around the world. Two of the most important section of our society i.e., daily wage laborers and Small and Medium Enterprises (SMEs) will have to bear the major burnt of this crisis. The proposed integrated Artificial Intelligence and NLP based Islamic FinTech Model combining Zakat (Islamic tax) and Qardh-Al-Hasan (benevolent loan) can help the economy to minimize the adverse impact of COVID 19 on individuals and SMEs. Design/Methodology/Approach: The present study explores the possibility of Zakat and Qardh-Al-Hasan as a financing method to fight the adverse impact of Corona virus on poor individuls and SMEs. It provides the solution by proposing an Artificial Intelligence and NLP based Islamic FinTech Model combining Zakat and Qardh-Al-Hasan. Findings: The findings of the study reveals that Islamic finance has immense potential to fight any kind of situation/pandemic. Zakat and Qardh-Al-Hasan, if combined together can prove to be a deadly combination to fight the adverse effect of COVID 19. Practical Implications: To be used as an effective way to support individuals and SMEs in the period during and after the pandemic of COVID 19. Originality/value: There is no study combining Zakat and Qardh Al-Hasan to fight the adverse effect of poor individuals and SMEs. The study will contribute massively to the existing literature and will help the government and civil societies in fighting the economic impact of COVID 19 on individuals and SMEs.

The Response of Islamic Financial Service to the COVID-19 Pandemic: The Open Social Innovation of the Financial System

“…ii Islamic finance believes in wealth distribution, not in wealth accumulation. Some of the financial products such as Sadaqa, Zakat and Qardh-Al-Hasan are examples that show that Islamic finance believes in preserving the rights of the poor by promoting the distribution of excess income by the rich [57]. iii Islamic finance is based on the equity mode of financing rather than the debt mode of financing.…”

Embracing of Fintech in Islamic Finance in the post COVID era

“…Islamic banks and financial institutions can utilize these financial instruments to direct cash transfer to the poor, vulnerable, SMEs and individuals during and after the COVID-19. These financial services can easily be linked to the financial technology (Fintech) and direct cash can be transferred to the beneficiaries on their account [5]. Islamic finance is based on the principle of social justice and equitable distribution of income, these principles can be extensively used during crisis [21].…”

“…Fintech based financial services are very popular among the Islamic finance customers, furthermore, the lock downs, during COVID-19, have provided further advancement and enhancement for FinTech. There has been around 72% increase in the users of Fintech in last 5 Months-Feb to June 2020 [5]. The Islamic Fintech is going to be the game changer for Islamic finance mainly due several reasons as shown in figure 3 [26]- [28] .…”

“…Emergency support in the short run: When it comes to the support in the short run, Zakat, Qardh-Al-Hasan and Sadaqat can be utilized to direct transfer of cash to the poor and needy. If these services are customized with the Fintech based technologies such as artificial intelligence, Blockchain and Natural Language Processing (NLP), it can help in achieving broader objective of poverty alleviation and financial inclusion [5].…”

“…We argue that Islamic finance can play a vital role in the recovery of economies in the post COVID-19 era due to its principles and recognition as an ethical finance. Islamic finance has several financial services like, Qardh-Al-Hasan, Zakat, Waqf and Social Sukuk which are tailor made for the crises and pandemic-like situations [4] [5].…”