The Corona Virus Disease 2019 (Covid-19) pandemic, which began in the first quarter of 2020, has had a huge impact on the economic and social sectors in Indonesia, marked by weakening purchasing power or household consumption levels, investment uncertainty, falling commodity prices. , and the deterioration of the financial system, as indicated by the decline in various domestic economic activities and the presence of MSMEs. The Covid-19 pandemic has caused the government to implement a Large-Scale Social Restriction (PSBB) policy in 2020 and the Enforcement of Community Activity Restrictions (PPKM) since early 2021, which has implications for limiting community activities, including economic activities, educational activities, and other social activities. The decline in these activities has an impact on the health, social and economic conditions of the community. Micro, Small and Medium Enterprises (MSMEs) which have a special position and a big role in the Indonesian economy. In the case of Indonesia, the spread of the pandemic led to the bankruptcy of more than 50 % of MSMEs due to demand shocks. The results of the Katadata Insight Center (KIC) survey of 206 MSME actors in Jabodetabek showed that, as many as 82.9% of MSMEs were negatively affected by this pandemic. Only a small percent age or 5.9% of the perpetrators actually experienced a positive impact. This pandemic even caused 63.9% of the affected MSMEs to experience a decrease in turnover of more than 30% and only 3.8% of MSMEs experienced an increase in turnover (Katadata.co.id, 2020).
In addition, MSMEs also face a number of obstacles in running and developing their business related to capital problems, availability of raw materials, and marketing problems. According to Rahmah et al (2021), around 60-70% of MSMEs have not had access or banking financing. Therefore, the role of banks and financial institutions is very important in developing MSMEs with limited capital. The establishment of Islamic Financial Institutions (LKS) is to support the Indonesian economy. Economics in Islam is a science that studies all human behavior in meeting the needs of life with the aim of obtaining Falah (peace and prosperity of the hereafter). Human behavior here is related to the basis of the Shari'a as a reference for human behavior and tendencies. These two things interact with each other to form a unique economic mechanism based on divine values. Consequently, the problem of economics in Islam is a matter of ensuring the circulation of wealth among human beings in order to maximize the function of life as a servant of Allah to achieve Falah in this world and the hereafter.
The role of Islamic financial institutions is needed, namely to collect funds from the public in the form of savings, then distribute them in the form of loans or capital. Islamic financial institutions apply a profit-sharing system which in this system does not allow borrowing for real non-business needs because the concept of mudharabah financing is only possible if the borrower needs capital for business. From the developed business, it generates profit, and the profit from the business is divided according to the mutually agreed agreement (akad). Based on assumptions like this, this profit sharing system cannot be applied to prospective borrowers to meet consumptive needs, such as school tuition, let alone just to buy clothes for Eid. This lending scheme is not through a mudharabah financing scheme, but through a murabahah (sale and purchase contract) scheme and it can also be a qardh al-hasan contract or a pure non-profit loan, where the repayment is only the principal debt. This has been done by Islamic financial institutions. Some of the Islamic financial institutions organize several small and medium-sized business groups. They organize borrowers and provide soft financing assistance. The aim is to strengthen their capacity in terms of business planning on a micro scale. Thus, LKS (Islamic Financial Institutions) can act as one of the partners of small or micro entrepreneurs, not only providing light capital assistance, but also providing guidance and empowerment.
