The Contribution of Profit and Loss Sharing (PLS) Financing For MSMEs of ASEAN Member States in the New Normal Post-Covid 19

Abstract

COVID-19 has challenged the Micro, Small, and Medium-sized Enterprises which are the backbone of the ASEAN Member States’ (AMS) economic growth. Profit and Loss Sharing (PLS) as a bank financing scheme offers an alternative model with flexibility in meeting the Covid-19 economic crisis by providing equity orientation for the MSMEs. This research aimed to investigate the contribution of PLS in supporting the MSMEs’ economic recovery packages in the AMS during the New Normal post Covid-19. For this purpose, this research posits the comparative evidence of PLS contribution by gathering data from the central banks, financial authorities, commercial banks and literature reviews related to economic recovery policies in the AMS. The result indicates that PLS can provide an alternative model for supporting MSMEs by allowing all parties to share both risks and losses in their capital input ratio.