Sharia Hybrid Hedging Model for Exchange Rate Risk Mitigation in Import-Export Transactions at Sharia Microfinance Institutions (LKMS)

Abstract

The Sharia Hybrid Hedging Model is offered as a solution to the challenges of exchange rate instability faced by Sharia Microfinance Institutions (LKMS), particularly in sharia-based export-import transactions. This model integrates sharia maqashid principles and digital technology through a three-layer approach: natural hedge, sharia contract, and smart waʿd engine. Document audits and case studies show that most MFIs in Indonesia and Malaysia do not yet have structured exchange rate risk mitigation policies. On the other hand, the potential for implementing this model is wide open with the support of regulatory frameworks and digital infrastructure. By prioritising the principles of efficiency, transparency, and Sharia compliance, this model is expected to improve the financial resilience and institutional reputation of MFIs in facing global market dynamics.