Achieving Islamic Social Finance Goals through Zakat, Waqf, and

Sadaqa in Selected Countries: Issues and Challenges

Dzuljastri Abdul Razak and Qosdan Dawami

Kulliyah of Economics and Management Sciences, International Islamic University Malaysia, Malaysia

Keywords: Islamic Social Finance, Zakat, Waqf, Sadaqa, Ummah.

Abstract: Islamic Social Finance is an important area of growth similar to Islamic Finance. However, there has been

limited study to discover its potential as it is at its nascent stage. The purpose of this study is to investigate

how Zakat, Waqf, and Sadaqa can contribute to the development of Islamic Social Finance. This study utilized

content analysis to evaluate the issues and challenges of achieving Islamic Social finance goals from the

secondary resources. The results would provide us an opportunity to further develop the potential of Islamic

Social Finance in enhancing the society and wellbeing of the Ummah.

1 INTRODUCTION

1.1 Background

Social issues currently have been taken into main

consideration by all countries of the world. Despite

several programs that have been applied by the

countries for many years, there are issues that remain

inevitable such as poverty, lack of food and clean

drinking water, lack of education and lackof

property(UNDP, 2019).World Bank (2019a)also

stated that thepertinent climate change has been

annoying to various dimensions of lives, namely

social wellbeing, sustainable economic and

environmental preservation of current and future

generations. Furthermore, lack of clean water sources

and sanitation are afflicting almost 38.5 million

peoplein Pakistan during 2004-2005 (Khan & Javed,

2007).

Realising the significance in addressing the social

issues above, Islamic Social Finance (ISF) is

considered as a sector with a vast potential in solving

these issues (Zain & Ali, 2018). Moreover, it provides

an alternative approach to the Muslim society in

improving social welfare and the better environment

which is operated based on Shariah compliant

(Shahwan et al., 2018). Simultaneously, the

awakening spirit of green finance globally as a part of

ISF instrument are able to enhance the role of ISF in

contributing to the development of social

wellbeing(World Bank, 2019a).

The ISF concept has existed since the early days

of Islam and its role has developed over time. This

sector consists of several institutions based on

philanthropy such as Zakat, Waqf and Sadaqa as well

as profit and non-profit Islamic microfinance (IRTI,

2014).Later on itdevelop from its traditional form to

be financial instruments such a green Sukuk and

Takaful with the goals of overcoming humanitarian

crisis at varying dimension (Zain & Ali, 2018).

Importantly, Zakat and Waqf are most widely

used as ISF instruments to address the

marginalization and vulnerability in the society. For

instance, Atah et al(2018) found in their study that

Zakat generated significant contribution in achieving

SDGs goals, namely no poverty, zeroes hunger, good

health and wellbeing, quality education, decent

work,reduced inequality, preserving from

environmental pollution and degradation. In addition,

the Islamic Development Bank has exhibited that the

total Zakat collected is in huge amount approximately

between US$230 and US $560 billion each year all

over the world (UNDP, 2018b). At the same time, as

long as generating environmental benefitsare

concerns, the green bonds globally have proven its

potentialits achieving ISF goals with the total

issuance amounting to around US$155.5 billion in

2017 (World Bank, 2019a).

Nonetheless, the use of financial instrument for

ISF such as Zakat, Waqf, Sadaqa, Sukuk, and Takaful

are facing several issues and challenges affecting its

effectiveness in achieving ISF goals. It is hampered

mostly by the issue of sustainability in the supply of

Razak, D. and Dawami, Q.

Achieving Islamic Social Finance Goals through Zakat, Waqf, and Sadaqa in Selected Countries: Issues and Challenges.

DOI: 10.5220/0010114500002898

In Proceedings of the 7th ASEAN Universities International Conference on Islamic Finance (7th AICIF 2019) - Revival of Islamic Social Finance to Strengthen Economic Development Towards

a Global Industrial Revolution, pages 38-45

ISBN: 978-989-758-473-2

funds and the absence of comprehensive regulatory

and policy frameworks (IRTI,2014).

This paper is organized as follows. The literature

review is after the introduction. This will be followed

by the statement of the problem. Then, the

discussionsection ending with conclusion and

recommendation.

1.2 Statement of the Problem

The development of Islamic Social Finance has

exhibited an impressive advancement in the last

decades. Zakat, Waqf, and Sadaqa are the most

important instruments with the purpose of achieving

ISF goals such as combating social problems and

enhancing the welfare of the Ummah in the future.

However, despite being a significant tool of ISF, they

are facing difficulties of having sufficient funding,

comprehensive regulatory and policy frameworks

and professional human resources. Furthermore,

there are different practices adopted by ISF is various

countries. Hence, it is very important to find out the

issues faced by ISF. In addition, there is also a need

to know the practices that are being adopted in three

selected countries such as Malaysia, Indonesia and

Pakistan to better understand the involvements of ISF

and evaluate the extent to which its goals have been

achieved.

1.3 Research Objectives

1. To find out the issues and challenges of Zakat,

Waqf, and Sadaqa in contributing to the

development Islamic Social Finance.

2. To evaluate the extend of Zakat, Waqf, and

Sadaqa has achieved Islamic Social Finance

goals.

1.4 Research Questions

1. What are the issues and challenges of Zakat,

Waqf, and Sadaqa in contributing to the

development Islamic Social Finance?

2. What are the extend of Zakat, Waqf, and Sadaqa

has achieved Islamic Social Finance goals?

1.5 Significant of the Study

This study contributes to the literature on the Islamic

social finance field which is still in the infancy stages.

It also enhances Sustainable Development Goals

(SDGs) and Environmental Social Governance

(ESG) literatures with new body of knowledge. This

study also enables Islamic Social Finance institutions

to renew its strength and improve its weakness by

implementing the suggested solutions affecting its

operations. Furthermore, the experience of three

countries namely Indonesia, Malaysia and Pakistan

are shared to benefit researchers.

2 LITERATURE REVIEW

2.1 The Islamic Social Finance

Revolution

The concept of ISF begun in the early history of Islam

andhas grown tremendously since last decade, with is

scope becomes broader than the initial sphere. It

provided financial assistancein various dimensions of

life for achieving ISF goals such as eradicating

poverty, providing better infrastructure of school and

hospital, preserving communities and the

environment (Zain & Ali, 2018).

Subsequently, the ISF revolution begun along

with the financial industry revolution. The structure

of ISF has been grown rapidly and broadly. It is

classified into three main categories (Zain & Ali,

2018):

i) Islamic traditional instrument that are based on

philanthropy such as Waqf, Zakat, and Sadaqa.

ii) Mutual Cooperative-base foundations such as

Qard and Kafala.

iii) Innovative Islamic instruments that are based on

responsible investment, financial inclusion and

impact investing such as SRI Sukuk, Islamic

microfinance such as Baitul Maal wat Tamwil

(BMT) in Indonesia, Amanah Ikhtiar Malaysia

(AIM), and Akhuwat in Pakistan and Islamic

Crowdfunding

This revolution instrument of ISF is primarily

subjected to overcome the social problems at varying

dimension rather than focusing on poverty

alleviation. The UNDP was collaborating with the

National Board of Zakat (BAZNAS) Indonesia, for

instance, to organize funds for rescuing the victims

and establishing renewable energy projects on the

latest earthquakes and the tsunami in Palu, Central

Sulawesi and Lombok (Gulf Times, 2018).

2.2 Definition of Islamic Social Finance

Social finance can be defined as a structure of

investment strategies with the main objective to

produce good impact for both social and

environmental outcomes for investors as well as

society. Hence, it consists of broad scope such as

community investment, microfinance, social impact

Achieving Islamic Social Finance Goals through Zakat, Waqf, and Sadaqa in Selected Countries: Issues and Challenges

bonds, community loan funds and some philanthropic

investment programs which is included under this

area(VISIZ, 2016).

The Islamic Social Finance definition is akin to

social finance in general. However, ISF has salient

features that operate to achieve Maqasid Shariah

(Objectives of Islamic law). It is social and faith-

based financing that provide financial assistance and

support people in need in order to alleviate human

suffering as well as to preserve environment from the

conflict and disaster affected (World Humanitarian

Summit, 2016). Accordingly, the approach is to

manage and invest funds to solve social challenges

and to improve communities and the environment.

2.3 Practices of Islamic Social Finance

in Selected Countries

ISF instrument such as Zakat, Waqf, Sadaqa are

utilized as instruments in combating the social crisis

at varies dimension, namely eradicating poverty,

assisting proper education and health. In the absence

of a good system, the ISF institution cannot manage

the flow of funds effectively and efficiently to

achieve its goal. In this section, we will describe and

evaluate the operations of the ISF institution in

selected countries, namely Indonesia, Malaysia, and

Pakistan.

2.3.1 Indonesia

Indonesia is the largest country in Southeast Asia.

The population of Indonesia approximately was 258

million in 2017, while the Muslim population

comprised almost 224.5 million or 87 percent of the

total population (Piliyanti, 2010). It is the world’s

largest island country with the Gross Domestic

Product (GDP) in 2017 worth US $1015.4 billion

(World Bank, 2019b). Management of Zakat, Infaq,

and Sadaqa (ZIS) in Indonesia utilized dual

institutional structure in which ZIS is managed by

both government institutions such as BAZNAS, and

private organizations such as LAZ, Dompet Dhuafa

Republika and Rumah Zakat Indonesia.(Piliyanti,

2010).

The management of Zakat in Indonesia has

exhibited an increasing trend in which the total Zakat

collection has been increased by 32 times over the last

decade or almost US$231.6 million in 2012. Those

Zakat funds, according to BAZNAS are distributedin

four main programs, namely education program,

humanitarian aid, health program and economic

program. Furthermore, the success story of the zakat

management in Indonesia is managed by Dompet

Dhuafa Republika. It is a philanthropic institution

mobilizing donated assets to help the poor through an

excellent program known as Zakah-based

microfinance and community empowerment project

approach (IRTI, 2014).

Simultaneously, Indonesia as the predominantly

Muslim country along with large progressive Waqf

potential which are regulated under Badan Wakaf

Indonesia (BWI). The beneficiaries of Waqf

disbursement through Ibadah (worship) and public

welfare programs, such as religious activities,

provision of education and health services, aid the

indigent, orphans, scholarship students, another

economic and community developmentin accordance

with Shariah rules (IRTI, 2014).

In addition, Baitul Maal wat Tamwil (BMT) is the

prominent Islamic Microfinance Institution (MFI)

established based on Islamic cooperative in

Indonesia. It comprise of Baitul Maal which manages

social funds and Baitul Tamwil which operates the

business function under the Islamic cooperative

system (Ascarya, 2017). However, Abdullah et al

(2018) found in their study that its role in improving

social welfare is still not effective because of the

internal and external issues affecting the operations.

Subsequently, for maximizing the distribution of

Islamic charities, BAZNAS has collaborated with

UNDP in 2017 in implementing social enhancement

program in Jambi. This project started with renewable

projects with local population comprise almost 5,000

people from 803 households in four villages in Jambi

province benefiting the electricity assistance. In

addition, the value Waqf land and property alone in

Indonesia has accounted almost US$27 billion or

estimated around 4.4 billion squared meters. This

huge amount has the vast potential in assisting the

government in achieving their social goals such as

reducing poverty and lessening inequality(UNDP,

2018b).

Furthermore, Islamic Research and Training

Institute and Bank Indonesia had established principle

framework for Waqf sukuk in 2018 in order to further

develop the positive impact of ISF on social wellbeing

and environmental preservation globally(Gulf Times,

2018). However, it was reported that climate change

caused massive loss approximately US$320 billion

loss globally (UNDP, 2018a).

Therefore, to assist in preserving the planet and its

people, the Ministry of Finance of Indonesia have

introduced new financial instruments of ISF in March

2018 namely green sukuk in US dollars. Surprisingly,

the success stories of green sukuk begins in which the

total funds increased up to US$1.25 billion over five

years (UNDP, 2018a).

7th AICIF 2019 - ASEAN Universities Conference on Islamic Finance

2.3.2 Malaysia

Malaysia is a federal constitutional monarchy

comprises 13 states and the federal territories of

Kuala Lumpur, Putrajaya, and Labuan. The estimated

population of Malaysia is 31.1 million in 2017 with

the Muslim population approximately 19.3 million in

2017 (Index Mundi, 2018a). Zakat mobilizations and

management has been increasing over 20 years in

which it increased 28 times or US$547 million in

2011 (IRTI, 2014). In addition, Malaysia is the new

industrialised market economy which has the Gross

Domestic Product was worth US$314.7 billion in

2017 (World Bank, 2019b).

Zakat institutions are managed by the State Islamic

Religious Council (SIRC) under offices such as Baitul

Maal, Zakat department and Zakat Committee

(Ahmed, 2004). Aziz et al (2015) also stated that the

institutional structure of Waqf and Sadaqa are under

the jurisdiction of SIRC of each state in order to ensure

the Islamic law and regulation on the Waqf and Sadaqa

management practices and to achieve efficiency of

Islamic religious programs. In addition, Amanah

Ikhtiar Malaysia (AIM) has the largest Islamic

microfinance established in 1987 as the replica of

Grameen bank which primary source of funds

subsidized by the government (Mokhtar et al., 2012).

All SIRC maximised the mobilisation of Zakat,

Waqf, and Sadaqa funds for resolving the social and

welfare needs. Johor Islamic Council, for instance,

has collaborated with Waqf An-Nur Corporation

Berhad (WANCorp) in maximizing role of Waqf in

several flagship programs, namely Management of

Mosque, Healthcare, Start-up capital for

microenterprises and disaster relief (IRTI, 2014).

Malaysia is considered as world’s Islamic finance

marketplace. Hence, the development of Islamic social

finance in this country was remarkable in the past few

years. It is marked by the world’s first issuance of SRI

sukuk in July 2017 by Tadau Energy in Malaysia.

Subsequently, the five issuances of green sukuk in

April 2018 with the total amount approximately

RM3.7 billion in which RM2.4 billion has been utilized

to assist renewable energy programs and green

building (World Bank, 2019a). Moreover, HSBC

Amanah Malaysia is the world-first private bank which

offered sukuk related to social finance at a big amount

of about $120 million. The funds will be utilized for

poverty assistance and sustainable energy generation

for the deserving communities (Gulf Times, 2018).

2.3.3 Pakistan

Pakistan is a federal republic consists of four

provinces, namely Balochistan, Punjab, Sindh, and

the North-West Frontier Province and two federally

administered territories, namely Islamabad and Azad

Kashmir. Pakistan is the sixth most populated country

with a population of 204.9 million. For the total

population, the highest percentage of religion is

Muslim at 96.4 percent or 197.5 million in 2017

(Index Mundi, 2018b). It has Gross Domestic Product

approximately US$304.9 billion in 2017 (World

Bank, 2019b)

Zakat and Waqf institutions in Pakistan are

operated by the government, individuals, and private

voluntary organizations (Ahmed, 2004). Overall, the

accumulation of Zakat in Pakistan is generally

indicating an upward trend which is increasing by

almost 40 percent over 3 years or US$105 million in

2011 .In addition, released data from the Ministry of

Religious Affairs stated that the zakat allocated by

several schemes such as rehabilitation and safety net,

social welfare, education and skill enhancement, health

care and administrative expenses(World Bank, 2019a).

Waqf institutions in Pakistan are run by the

independent waqf administration in each province,

namely Punjab, Sindh, Baluchistan, and Khyber-

Pakhtunkhwa. All these four administrations headed

by a chief waqf administrator known as Central Waqf

Council (IRTI, 2014). Ahmed (2004) deliberated the

example of Waqf disbursement in Punjab province

that it is classified into four main programs such as

administration, religious affairs, social welfare,

healthcare and national development budget. In

addition, Akhuwat Pakistan acts as Islamic

microfinance institution founded on the spirit of

brotherhood in improving social welfare through the

interest-free loans, Qardhul Hassan (Jaafar, 2018).

Inspiringly, the fabulous practices of Zakat

management operated by Shaukat Khanum Memorial

Cancer Hospital& Research Centre inPakistan were

established in 1994 in Lahore. This is the first and only

cancer hospital in Pakistan based on International

standard with the purpose oferadicating the suffering

of patients with cancer irrespective of their ability to

pay. Moreover, the hospital utilized Zakat funds is one

the sustainable sources for resilient charities projects

with mixed beneficiaries. It has an annual budget

around PKR 5.8 billion (World Bank, 2019a).

2.4 Comparison of Islamic Social

Finance Model

Islamic Social Finance has great potential in

promoting development of social wellbeing and

sustainable environments. Its role and contribution

through utilization of its tools and instruments. This

study measured the extent of contribution of ISF

Achieving Islamic Social Finance Goals through Zakat, Waqf, and Sadaqa in Selected Countries: Issues and Challenges

Table 1: Comparison of Zakat, Waqf, and Sadaqa.

No Type Indonesia Malaysia Pakistan

1 Population

258 million 31.3 million 204.9 million

2 Muslim Population

224.5 million 19.3 million 197.5 million

3 GDP (US$)

1015.4 billion 314.7 billion 304.9 billion

4 Zakat Collection (US$)

231.6 million 547 million 105 million

Institutional

Structure

Zakat

&Sadaqa

Government and

Private organization

State Islamic Religious

Council (SIRC)

Government &

Private organization

Waqf Badan Wakaf

Indonesia (BWI)

State Islamic Religious

Council (SIRC)

Province Waqf

administration

6 Islamic Microfinance

Baitul Maal Wat

Tamwil (BMT)

Amanah Ikhtiar

Malaysia (AIM)

Akhuwat Pakistan

7 Success project practices

Dompet Dhuafa

Republika

Waqf An-Nur

Corporation Berhad

Shaukat Khanum

Cancer Hospital

Source: Authors’ own work

institutions in selected countries, namely Indonesia,

Malaysia, and Pakistan.

The Table1 above described the comparison of

Zakat, Sadaqa, and Waqf feature in selected countries

in which all three countries have several similarities

and differences in the practices. The results illustrated

that the highest number of populations was Indonesia

285 million in 2017 followed by Pakistan 204.9

million. The lowest is Malaysia with approximately

31.3 million. Another major difference is that

Indonesia has the biggest Muslim population among

three selected countries with 224.5 billion, whereas

the Muslim population of Malaysia and Pakistan are

around 19.3 million and 197.5 million

respectively(World Bank, 2019b).

In the Gross National Product (GDP), Indonesia

has the highest GDP with US$1015.4 billion in 2017.

This is followed by Malaysia and Pakistan with

US$314.7 billion and US$304.9 billion respectively

in 2017. Surprisingly, Malaysia is the highest rank in

the term of total Zakat collected even though it has

the smallest number of populations, it was

approximately US$547 million in 2011. The total

Zakat collected in Indonesia and Pakistan, on the

other hand, were US$231.6 million and US$105

million respectively in 2011(IRTI, 2014).

Moreover, from the institutional structure

viewpoint, the management of Zakat and Sadaqa in

Indonesia are managed by both the National Board of

Zakat (BAZNAS) and private agencies of Zakat such

as private institutions for Zakat (LAZ), Rumah Zakat

Indonesia, Dompet Dhuafa, and Republika. Whereas

in Pakistan, the mobilization of Zakat and Sadaqa are

administered also by the government and private

organization. However, unlike Indonesia, Pakistan

specified the compulsory sadaqa or zakat has to be

collected to the governmental institutions. On the

other hand, the management of zakat in Malaysia is

under the jurisdiction of the State Islamic Religious

Council of each state(IRTI, 2014).

According to the type of innovative Islamic

instruments in selected countries, namely Baitul Maal

wat Tamwil (BMT) in Indonesia, Amanah Ikhtiar

Malaysia (AIM) and Akhuwat in Pakistan. BMT

collects the fund from several sources such as

members’ deposits, Islamic charities and borrow

funds from an Islamic financial institution when there

is lack of fund (Ascarya, 2017). Whereas, Amanah

Ikhtiar Malaysia is funded mainly from the

government subsidies (Mokhtar et al., 2012). On the

other hand, Akhuwat Pakistan generated the funds

mostly from the donation and Islamic charities

(Jaafar, 2018).

2.5 Issues Affecting Islamic Social

Finance Institutions

ISF as important growth areais able to turn up a

significant role in combating social crisis at varying

dimension since its inception. Hence, there are

limitations currently faced by ISF affecting its

effectiveness and efficiency in achieving the ISF

goals (UNDP, 2018b), namely lack of standards of

governance, lack quality of human resources, lack of

disclosure and transparency, lack capital structure of

funding.

2.5.1 Lack Standards of Governance

The governance system of an institution is very

substantial for the success and sustainability of

institutions. According to Zain & Ali (2018) who

studied on “An analysis on Islamic Social Finance for

protection and preservation of Maqasid Shariah”,

they found that management of ISF instruments,

including Zakat, Waqf, and Sadaqa, lack of

7th AICIF 2019 - ASEAN Universities Conference on Islamic Finance

standardization of governance. Huda ( 2014)also

found in his study that the current Indonesian

regulation Law No 23/2011 related to Zakat

Management is still in debatable issues among

stakeholders.

Pursuing standardization of Waqf governance

isvery in need in order to maximize the utilization and

end the issues. (Puad et al., 2014) found that several

challenges highlighted in Waqf practices in Malaysia,

namely the legal framework of the Malaysia land

Administration system cannot be applied on Waqf

land, and lack of Waqf standardized application

procedures and Waqf management issues. Noor et al

(2014)was also found on their study on the Waqf

governance framework in Malaysia is under the

supervision of each state’s SIRC. Hence, there are

differences in the management of Waqf properties

governance such as disbursement because each state

adopted different methods in mobilization of Waqf

properties. This is further supported by Abdullah et al

(2018) that the external issues of Waqf management

in Indonesia also lack in regulation and the

governance support of the Waqf management.

2.5.2 Lack Quality of Human Resources

The good quality of human resources is a pivotal part

of any business management, including ISF in order

to pursue the success and sustainability of institution.

Zain & Ali (2018) found in their study that one of the

serious problems of ISF is lack of human resources in

both quantity and quality. In addition, the issue of

quality of human resources still becomes critical

problem in implementing the proper system and

regulation. Puad et al (2014) also found that lack of

professional of human resources in managing the

Waqf assets were part of the challenges facing by

Majlis Agama Islam Selangor MAIS

Abdullah et al (2018) in their deep analysis of

internal problem found that the five internal

challenges facing the management of Waqf in

Indonesia such as low quality and professionalism of

nadzhir, lack attractiveness of nadzir profession.

Hamzah et al (2013), in addition, found in their study

on Analysis Problem of Baitul Maal Wat Tamwil

(BMT) Operation in Pekanbaru, Indonesia that the

issues of BMT is the Islamic microfinance is lack

quality of human resources which affecting the

sustainability and effectiveness.

2.5.3 Lack Transparency and Disclosure

Transparency of financial institution is very

important in order to build public trust and

confidence. As ISF is still at its nascent stage faces

issue in public confidence due to this set back. This

has affected the collection of Zakat as the obligation

due to lack of disclosure and transparency in

management. The problem of integrity, transparency

and professionalism in managing of social funds

affecting negatively to the level of public trust and

credibility which determined a sustainability of social

funds (IRTI, 2014). This is further supported by Zain

& Ali (2018) who found out that absence of standard

of governance, including transparency and disclosure

inducing the issue of corruption and embezzlement.

Hence there is a need to improve the accounting

standard and transparency to address the issues facing

ISF in this context.

2.5.4 Lack Capital Structure of Funding

The capital structure of an institution is very crucial

and plays an important role in every business

sustainability in the long-term. Ascarya (2017)

studied on Baitul Maal wat Tamwil (BMT): an

Islamic Social and Commercial Financial Institution

in Indonesia revealed a structural problem of funding

caused by higher demand for financing compared

lower amount of deposit available. As a result, BMT

has to rely on funds placement from banks which bear

a higher cost. In addition, Abdullah et al (2018) found

also in their study that the issue lack structural of

funds hampers the institution in conducting the

training to enhance the quality and skill of staffs.

3 DISCUSSION

Mobilization of Zakat, Sadaqa and Waqf in selected

three countries has been playing an important role in

the achieving the ISF goals since its establishment

even though there are several differences in the

practices. One of the major differences is that the total

zakat collected in Malaysia is highest although its

total Muslim population is less than the total Muslim

in Indonesia and Pakistan with about eleven-fold and

ten-fold respectively.

According to the institutional structure, Zakat and

Sadaqa funds in Malaysia are disbursed to the

beneficiaries by respective SIRC of each state.

Mobilization of Zakat and Sadaqa in Indonesia and

Pakistan, in contrast, is managed by, either through

the governmental committee or by several voluntary

institutions.

Another difference can be seen from the type of

Islamic microfinance institution. BMT in Indonesia

faces shortage of funding in which its sources of

Achieving Islamic Social Finance Goals through Zakat, Waqf, and Sadaqa in Selected Countries: Issues and Challenges

funding such as members’ deposits and Islamic

charities is considered as fluctuated with lowest

proportion. Similarly funding for Akhuwat Pakistan

is also affected as its funds are mostly generated

through Islamic charities and the donation from both

individual and institution. Both incomes of Akhuwat

are fluctuating funds and not fixed overtime. AIM,

in contrast, is subsidized by the government in which

the issue of structure problem of funding can be

resolved.

Furthermore, maximization of zakat disbursement

is necessary to be supported by the good governance

and systems. The lack standard of governance will

result in inefficient and misappropriation of zakat

distribution. Zakat, Sadaqa and Waqf management in

Malaysia, for instance, has different standard of

governance in each state. Hence the practices also

differ between the three countries in the study namely

Indonesia, Malaysia and Pakistan. Thus, there is a

need for a global standard to address this issue. The

lack of transparency and disclosure of institution

affected the trust of Islamic charities payerswho

prefers to pay directly to the beneficiaries rather than

contributing to philanthropic institutions.

4 CONCLUSIONS

Zakat, Waqf, and Sadaqa instruments have been

contributing significantly in achieving the ISF’s goals

to mitigate poverty, provide better infrastructure of

school and hospital, and preserve life and the

environment. Moreover, ISF also moves forward

together with Sustainable Development Goals

(SDGs) and Environmental Social Governance

(ESG) in the same direction. However, it has to

address the need of standard of governance globally

in order to improve its role and effectiveness. Equally

important is having quality of human resources in this

field in order to ensure the proper mobilization of ISF

funds and practiced in the line of Shariah compliance.

Hence, ISF’s management has to improve the skill

and ability of their staff through several training and

seminar. There also needs to increase the

transparency and disclosure in order to build higher

confidence and public trust towards the institution.

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