KUALA LUMPUR: Alliance Islamic Bank Bhd launched Malaysia's first book on zakat microfinancing, titled 'Zakat and Microfinance', which pioneers the productive distribution of zakat funds as microfinancing to empower the underprivileged or asnaf micro-entrepreneurs.
As the objective of zakat is to alleviate poverty, the book aims to promote equitable development and financial inclusion of all categories of entrepreneurs.
Alliance Islamic chief executive officer Rizal IL-Ehzan Fadil Azim said the bank sees the potential of using Islamic social funds such as zakat to help the asnaf community, especially after the onset of the COVID-19 pandemic.
"Through this, we hope to serve the community better and create a greater social impact.
"The book and our upcoming pilot Zakat Microfinancing Programme lead the way in promoting financial inclusion by providing accessible funding to this segment," he said.
The utilisation of zakat funds for microfinancing to empower communities and progress asnaf micro-entrepreneurs out of poverty through business is a breakthrough concept.
It pioneers Malaysia's first social financing model that utilises zakat for microfinancing and is aligned with Bank Negara Malaysia's Value-Based Intermediation (VBI) agenda, which promotes a socio and eco-centric banking model in furtherance of the intended outcomes of shariah.
Alliance Islamic Bank consulted with various organisations and committees to obtain input on the permissibility of productively distributing zakat funds as microfinancing to asnaf micro-
entrepreneurs.
"We understand that asnaf micro-entrepreneurs have difficulties scaling their business due to limited access to financing and lack of business guidance.
"To help address these challenges, we have embedded training and peer support into the pilot Zakat Microfinancing Programme.
"By providing them with an opportunity to grow their business professionally and with accountability, we support and partner asnaf micro-entrepreneurs in their progress towards financial resiliency, transforming them from a zakat recipient into a future zakat contributor," Rizal said.
Alliance Islamic conducted extensive research in collaboration with subject-matter experts, Islamic studies researchers specialising in social financing from Universiti Kebangsaan Malaysia and Pusat Pungutan Zakat – Majlis Agama Islam Wilayah Persekutuan.
The book discusses the principles of distributing zakat funds to asnaf micro-entrepreneurs as qard (repayment without profit).
In addition to the concept of social microfinancing based on shariah principles, the book outlines evidence and best practices shared by scholars, alongside a collection of legal and philosophical views.