BRIDGING INSTITUTIONAL GAPS IN ZAKAT DISTRIBUTION FOR FINANCIAL RESILIENCE: ADDRESSING RISING INDEBTEDNESS IN ISLAMIC FINANCIAL INSTITUTIONS

Siti Mazlita Yamaludin; Mohd Rahim Khamis; Sharifah Faigah Syed Alwi; Mohd Suffian Mohamed Esa; Azman Abd. Rahman

doi:10.33102/jfatwa.vol31no3.864

Authors

Siti Mazlita Yamaludin Faculty of Business and Management, Open University Malaysia
Mohd Rahim Khamis Faculty of Business and Management, Universiti Teknologi MARA, Malaysia
Sharifah Faigah Syed Alwi Arshad Ayub Graduate Business School, Universiti Teknologi MARA, Malaysia
Mohd Suffian Mohamed Esa Institute of Islam Hadhari, Universiti Kebangsaan Malaysia, Malaysia
Azman Abd. Rahman Faculty of Syariah and Law, Universiti Sains Islam Malaysia (USIM), Malaysia

DOI:

https://doi.org/10.33102/jfatwa.vol31no3.864

Keywords:

Indebtedness , gharimin (genuine debtors) , zakat distribution, Islamic financial institutions (IFIs), grounded theory

Abstract

Indebtedness has become a growing socio-economic concern in Malaysia, exposing limitations in conventional income-based approaches to identifying financially vulnerable individuals. Within Islamic social finance, this raises an important question regarding how zakat for asnaf gharimin (genuine debtors) can respond to increasingly complex and situational forms of financial distress. This study examines how gharimin eligibility and zakat allocation are conceptualised and facilitated through institutional collaboration between zakat institutions and Islamic Financial Institutions (IFIs) in Malaysia. Using a grounded theory approach, qualitative data were collected through in-depth interviews with zakat officers, academicians, IFI practitioners, and debt agency representatives, complemented by document analysis. The findings reveal three interrelated dynamics: situational asnaf, whereby temporary financial shocks create context-dependent eligibility; institutional and governance mechanisms, where Shariah principles interact with contextual judgement in determining eligibility; and conflict-of-interest concerns within IFIs, requiring a balance between ethical governance and institutional financial roles. Integrating these findings, the study develops a Strategic Solutions Framework for Gharimin, offering a substantive theory that shifts zakat allocation from a fragmented, poverty-centred approach towards an adaptive and institutionally coordinated model. Its originality lies in integrating situational asnaf classification, Shariah-governed needs-based prioritisation, and data-driven institutional coordination within a zakat-specific framework. Theoretically, the study extends the conceptualisation of gharimin beyond static poverty classifications, while practically, it provides guidance for zakat institutions and IFIs to improve the identification, prioritisation, and support of financially distressed individuals through more responsive and ethically governed allocation mechanisms.

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Author Biography

Siti Mazlita Yamaludin, Faculty of Business and Management, Open University Malaysia

Dr. Siti Mazlita Yamaludin is a Senior Lecturer at the Faculty of Business and Management, Open University Malaysia (OUM), with expertise in Islamic banking and finance and Islamic Studies (Shariah), particularly in strategic management and Islamic social finance. She previously served as a lecturer at the Academy of Contemporary Islamic Studies (ACIS) and held senior executive roles in Shariah advisory, research, and consulting at Kuwait Finance House (Malaysia) and the Centre for Research and Training (CERT). Her research focuses on grounded theory in qualitative methods, Islamic social protection policies, household financial sustainability, and economic transformation through a Maqasid al-Shariah-based approach. Her research also extends to consultancy work in Islamic finance, where she applies her expertise as a Certified Shariah Advisor (ASAS). She can be reached through her email at mazlita@oum.edu.my. Orcid ID: 0000-0003-4647-6912

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