Islamic Banks Concern with the Poor and Micro Businesses: An Evaluation on their Al Qard Hasan (Beautiful Loan)

Abstract

Islamic Banks came up with one of the notions as stated in the Quran (59:7) i , wealth must not be a perpetual distribution among the rich. This can be manifested in the form of distributing credit to the real business sector through a financing product, namely Al qard hasan (beautiful or benevolent loan). This paper is aimed at investigating the role or performance of Islamic banks in distributing Al qard hasan, usually given to the micro businesses, poor and less bankable people. This research is a descriptive research employing financial data from banks' annual reports. The sample taken is Indonesia's four major sharia compliant banks (BUSN) which are also categorized as foreign exchange banks. The results show that over the period of observation, the Al qard hasan of all banks had a declining tendency. Among the four banks, BSM and BNIS are the banks which had the highest portion of Al qard hasan (over the total financing). This result evidenced that the government owned banks (BSM and BNIS) had more concern with the poor and micro businesses, compared to the privateowned banks (BMI and BMS). To the author's knowledge, this is the first study to address the issue of Al qard hasan in the Indonesian context using the major Islamic banks.

Do Financing Schemes Affect the Functions of Islamic Banks in Indonesia?

“…This distribution is expected to further increase small & micro businesses because it raises capital both for business development and starting a business (Ahmad et al, 2020). If the distribution of financing with Qardh massif is carried out, it can level the distribution of income and reduce poverty (Firmansyah, 2016); (Junaidi et al, 2017);(Mohseni-Cheraghlou, 2017). Qardh become a contract to redeem the rights of the less able in the income and wealth of more able.…”

Knowledge Level and Determinants Factors in Selecting to the Islamic Rural Banks

“…Qardhul hasan, also known as a beautiful loan, is a free-interest loan provided by the Islamic banks, either private or government-owned banks. In his research, (Firmansyah, 2016) stated that governmentowned banks tend to have a higher rate of qardhul hasan than private banks. Qardhul hasan is believed to be effective in providing financial assistance to those who are in need, such as farmer or the poor (Rahman, 2010;Saqib, Zafar, Khan, Roberts, & Zafar, 2015;Widiyanto, Mutamimah, & Hendar, 2011).…”

Determinant of Qard: Evidence from Indonesian Islamic Rural Banks

“…Bank size affects financing distribution (Firmansyah, 2016), depending on the asset worth. According to Muhammad (2019), assets are resources formerly controlled by Islamic entities to gain economic benefits through banking.…”