Exploring The Potential Of Using Zakat Funds Of Islamic Banks For Microfinancing

Authors

  • Nurul Amira Jeffry Postgraduate student
  • Nurul Madihah Rishahfaizal Postgraduate Student
  • Sharifah Faigah Syed Alwi Professor

Keywords:

Asnaf, Islamic banks, Microfinancing, Zakat, Malaysia

Abstract

Zakat-based microfinancing is presented as an innovative approach towards productive Zakat distribution, despite the different viewpoints among classical Muslim jurists towards its permissibility. Distributing Zakat through microfinancing can enable and promote Asnaf (Zakat recipients) self-sustainability in generating additional income and improve their financial standing. This study has two objectives, which are to examine the opinion of contemporary Shariah scholars towards using Islamic bank’s Zakat funds for microfinancing and to investigate the justification behind the acceptance and rejection of implementing Zakat-based microfinancing among the Islamic banks in Malaysia. This study adopted a qualitative research methodology where in-depth interview sessions were conducted with Shariah scholars and bankers who were directly involved with Zakat-based microfinancing. Findings reveal divergence among Shariah scholars regarding the utilisation of Zakat funds for microfinancing, with some endorsing the practice and vice versa. Additionally, the majority of Islamic banks refrain from adopting Zakat-based microfinancing for various reasons, including differing opinions among Muslim jurists on its permissibility, the availability of alternative assistance sources for the Asnaf, and the absence of a fatwa addressing this matter. However, this study identified one Islamic bank in Malaysia actively committed to implementing Zakat-based microfinancing. They believe that this approach serves as a Zakat distribution method that enables the growth of Zakat funds and uplifts Asnaf entrepreneurs. To conclude, Zakat-based microfinancing offers a targeted and impactful strategy to support the financial needs of Asnaf, thus enhancing their socio-economic well-being. Regulatory support and guidance from Bank Negara Malaysia could further encourage the facilitation of this innovation's implementation.

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Author Biographies

Nurul Amira Jeffry, Postgraduate student

Arshad Ayub Graduate Business School, Universiti Teknologi MARA, Shah Alam

Nurul Madihah Rishahfaizal, Postgraduate Student

Arshad Ayub Graduate Business School. Universiti Teknologi MARA, Shah Alam

Sharifah Faigah Syed Alwi, Professor

Arshad Ayub Graduate Business School, Universiti Teknologi MARA, Shah Alam

References

Book

Muhd Adnan, N. I, Nik Abdul Ghani, N. A. R., Abd Rahman, A. H., & Abdullah, M. F. (2022). Zakat dan Pembiayaan Mikro. Kuala Lumpur: Alliance Islamic Bank.

Interview

Azian Meor Hamzah. Head, Operational Risk & Regulatory Control, Ambank Islamic Berhad. 22 May 2023.

Dato' Prof. Madya Dr. Haji Miszairi Haji Sitiris. Sahibus Samahah, Timbalan Mufti Selangor. 29 May 2023.

Dr. Mohammad Firdaus Mohammad Hatta. Chairman of Shariah Committee, Great Eastern Takaful Berhad. 13 June 2023.

Dr. Syed Shahridzan Syed Mohamed. The Deputy Chief Mufti in the Research Department, Mufti Wilayah Persekutuan. 16 June 2023.

Muhammad Ashraf Misran. Assistant Vice President, Shariah Advisory and Research, Alliance Islamic Bank Berhad. 12 May 2023.

Muhammad Syamim Nafis Jamil. Vice President, Head Shariah Advisory and Research, Alliance Islamic Bank Berhad. 12 May 2023.

Reizal Amiruddin. Head, Shariah Management Department, Ambank Islamic Berhad. 22 May 2023.

Zulfikri Syuib. Executive, Social Finance Department, Bank Muamalat Malaysia Berhad. 26 May 2023.

Journal

Ali, I., & Hatta, Z. A. (2014). Zakat as a poverty reduction mechanism among the Muslim community: Case study of Bangladesh, Malaysia and Indonesia. Asian Social Work and Policy Review, 8(1), 59–70.

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Proceeding

Abubakar, A., Dahiru, I., & Auwal, M. (2021). The role of Zakat in poverty reduction among contemporary household in Gombe Metropolis, Gombe State Nigeria. Proceedings of the 2nd Kedah International Zakat Conference 2021 (i-KEIZAC 2021), 47–56.

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Website

Bank Negara Malaysia. (2019). Shariah Governance. Bank Negara Malaysia. https://www.bnm.gov.my/-/policy-document-on-shariah-governance

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Published

2024-05-15

How to Cite

Jeffry, N. A., Rishahfaizal, N. M. ., & Syed Alwi, S. F. (2024). Exploring The Potential Of Using Zakat Funds Of Islamic Banks For Microfinancing. Al-Qanatir: International Journal of Islamic Studies, 33(3), 369–378. Retrieved from https://al-qanatir.com/aq/article/view/910