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Empowering Asnaf through Zakat and Digital Transformation: A

Literature Review on Challenges and Strategic Directions in

Malaysia

Maimunah Johari

, Maymunah Ismail

*, Azhana Othman

, Nurul Zamratul Asyikin Ahmad

, and

Marziana Abd Malib

1,2,3,4

Faculty of Business Management, Universiti Teknologi MARA, Cawangan Melaka, 78000, Melaka,

Malaysia.

Law Department, Universiti Teknologi MARA, Cawangan Melaka, 78000, Melaka, Malaysia.

*Corresponding Author

DOI: https://dx.doi.org/10.47772/IJRISS.2025.91100071

Received: 09 November 2025; Accepted: 18 November 2025; Published: 29 November 2025

ABSTRACT

This paper reviews the intersection between Zakat as a cornerstone of Islamic social finance and digital

transformation for empowering the Asnaf community in Malaysia. Through a systematic literature review, it

examines the challenges and strategic directions in integrating financial technology (Fintech) and digital

platforms into zakat management. This review highlights how digitalization enhances transparency,

accountability, and efficiency in zakat collection and distribution, ensuring more equitable access to resources

and improving socio-economic outcomes for beneficiaries. However, despite Malaysia’s progressive zakat

infrastructure, challenges persist, including digital literacy gaps, inadequate technological readiness, regulatory

constraints, and uneven access to digital tools among Asnaf communities. Addressing these challenges requires

a comprehensive digital strategy underpinned by Shariah compliance, robust governance, and technological

innovation. The review highlights the role of Islamic fintech, such as blockchain and mobile payment systems,

in promoting financial inclusion and strengthening institutional credibility. Furthermore, it identifies the need

for capacity building, particularly in digital entrepreneurship and literacy, to transform Asnaf from passive

recipients into active economic contributors. Ultimately, the paper discusses that the synergy between zakat and

digital transformation presents a transformative pathway for sustainable poverty alleviation and socioeconomic

empowerment in Malaysia, aligning with the objectives of Maqasid al-Shariah and the United Nations

Sustainable Development Goals (SDGs).

Keywords: Asnaf, Zakat, Digital Transformation, Social Finance, Fintech.

INTRODUCTION

This paper reviews the confluence of Zakat, a fundamental pillar of Islam, and digital transformation, as

mechanisms for empowering Asnaf in Malaysia, addressing both existing challenges and proposing strategic

directions. Specifically, it explores how leveraging digital platforms can enhance the efficiency and transparency

of Zakat collection and distribution, thereby maximizing its impact on socio-economic development within the

Asnaf community [45] and [41]. The integration of financial technologies into Zakat management systems

represents a significant paradigm shift from traditional methods to more sophisticated digital markets [58]. This

digital integration has the potential to streamline Zakat operations, ensuring greater accountability and broader

reach in its disbursement to beneficiaries [55]. This evolution is particularly important in Malaysia, where the

digitalization of Zakat management systems is seen as a key strategy to improve the recording of Asnaf

beneficiaries and track collected and distributed funds more effectively [58].

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Furthermore, the rapid advancements in information and communication technology, driven by the Industrial

Revolution 4.0, offer substantial opportunities for optimizing Zakat compliance strategies and enhancing

community engagement programs [45][3]. Consequently, zakat institutions are increasingly encouraged to

augment their technological preparedness and deepen their understanding of innovation to fully exploit digital

assets and capabilities for zakat management [58]. This includes adopting mobile applications and online

donation systems to improve the transparency and reliability of ZISWAF fund management [15]. Such digital

transformation not only streamlines the administrative processes but also fosters greater trust among donors

through enhanced transparency in financial transactions and beneficiary identification [15]. However, despite

these advancements, the Asnaf community continues to struggle with persistent socio-economic issues, including

an inability to meet basic needs, significant digital disparities, and limitations in entrepreneurial opportunities

[27]. Therefore, a robust digital infrastructure coupled with strategic interventions is crucial to elevate Asnaf

from mere recipients to active economic participants, fostering sustainable self-sufficiency through initiatives

such as digital entrepreneurship [44].

In short, the potential of technology integration in Islamic social finance extends beyond mere operational

efficiency to fostering broader societal welfare by enhancing transparency, accountability, and impact [39][49].

Therefore, this paper delineates the challenges hindering the effective digital transformation of zakat institutions

in Malaysia and proposes strategic directions to overcome these impediments, ultimately aiming for enhanced

Asnaf empowerment.

LITERATURE REVIEW

This section synthesizes existing scholarship on the challenges and strategic directions pertaining to Zakat and

digital transformation in the context of empowering Asnaf in Malaysia. It examines how digital solutions can

address the socio-economic disparities faced by Asnaf, including inadequate access to basic necessities,

technological gaps, and limited entrepreneurial avenues. Moreover, the literature highlights the imperative for

Zakat institutions to embrace technological advancements, such as mobile payment applications and social media

platforms, to enhance compliance, transparency, and community engagement [3]. This involves moving beyond

traditional methods and embracing comprehensive digitalization, which can accelerate good governance

practices in zakat management [13][3]. Such strategic implementation of technology necessitates an

understanding of emerging digital trends and their application in enhancing both the collection and distribution

efficiency of Zakat funds [58]. For instance, digital platforms hold substantial potential for enhancing the

competitiveness of Asnaf zakat entrepreneurs, particularly as the prevalence of digital business has surged due

to events such as the COVID-19 pandemic [44]. This digital transformation also facilitates greater financial

inclusion for communities in remote areas, enabling easier access to Islamic financial services through platforms

like e-wallets and mobile banking [19].

Empowering Zakat Through Technology

The development of Islamic financial technologies is important to improve online market liquidity and social

finance, thereby strengthening the digital economy [18]. The integration of shariah economic principles within

digital zakat technologies is important for optimizing mustahik empowerment programs [25]. The

institutionalization and corporatization of zakat management, which began in the 1990s with the introduction of

computerized systems and modern payment channels, laid foundational groundwork for contemporary digital

advancements [61]. More recently, this has evolved to include sophisticated digital platforms for Zakat collection

and distribution, mirroring trends in waqf management where blockchain and Fintech applications are gaining

traction to improve transparency and efficiency [9]. The goal is to equip these technological advancements to

not only enhance the operational efficacy of Zakat institutions but also to address the persistent socioeconomic

challenges faced by the Asnaf community, fostering their transition towards selfsufficiency and improved

welfare [1].

Furthermore, the evolving digital landscape reshapes economic behaviors, necessitating shariahcompliant

strategic measures and robust corporate governance to ensure the sustained impact of Islamic economic activities

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[67]. This integration, therefore, demands a meticulous assessment of the challenges inherent in digitalizing

zakat operations and the formulation of strategic directions to effectively leverage technology for Asnaf

empowerment. This involves not only optimizing the collection and distribution of Zakat but also equipping

Asnaf with the digital literacy and tools necessary to participate in the modern economy [1]. Specifically, the

increasing use of digital payment systems, including e-wallets and mobile banking, offers a pathway for

streamlined Zakat collection and distribution, especially in areas with limited access to conventional banking

infrastructure [2].

In addition, various empirical studies in Malaysia have proved the true effectiveness of digital transformation in

zakat management. Research on the digital effort of Selangor Zakat Board (LZS) discovered that the usage of e-

zakat and digital distribution platforms lowered aid processing time, increased record transparency, and

increased Asnaf satisfaction [72]. Similarly, Kedah State Zakat Board program known as ‘Zakat on

Touch’demonstrated that digitalization successfully accelerated data verification and facilitated Asnaf profiling,

hence boosting zakat distribution accuracy. These empirical findings provide compelling evidence that digital

integration is more than just an administrative strategy; it leads to measurable performance improvements in the

zakat collection and distribution process. Asnaf partaking in the digital platform helps to improve literacy and

participation of Asnaf zakat entrepreneurs [44].

Furthermore, in the context of zakat management, empirical studies found that Selangor Zakat Board

successfully shortened aid processing time by implementing a computerized distribution methodology, with data

analysis demonstrating enhanced transparency and Asnaf satisfaction [72]. Similarly, Kedah State Zakat Board

showed how digitalization may enhance data accuracy and accelerate recipient profiling [73]. Hence, these

findings provide compelling evidence that the use of digital technology can enhance the effectiveness of zakat

collection and distribution in Malaysia.

The Integration of shariah-based digital payment

The shariah-based digital payment solutions can further facilitate the distribution of various Islamic social funds,

such as infaq, sadaqah, and waqf, thereby fostering broader economic recovery and growth [8]. The COVID-19

pandemic further accelerated the shift towards non-cash transactions, including zakat payments, highlighting the

urgency for zakat institutions to undergo a comprehensive digital transformation [22][8]. This shift underscores

the necessity for zakat institutions to embrace digital channels not merely for operational efficiency but as a

fundamental component of their strategic outreach and financial inclusion efforts [13]. Such digital

advancements, including blockchain, artificial intelligence, and mobile platforms, present unique opportunities

to strengthen zakat and waqf operations and governance, enhancing transparency, automating recordkeeping,

and reducing corruption [37][39]. These modern approaches to Islamic philanthropy, including strategic fund

allocation and integration into contemporary financial systems, are important for adapting Zakat and Waqf to

address complex societal issues like poverty alleviation and educational development.

However, there are challenges that need to be faced, such as the need for greater public awareness, regulatory

support, and overcoming a preference for conventional financial institutions to fully realize the potential of

Islamic social finance in sustainable economic development [50]. Despite these challenges, integrating

technologies like cloud computing can significantly optimize the collection and management of Islamic social

finance, enhancing its overall performance in poverty alleviation efforts [65]. Therefore, a comprehensive review

of existing literature is essential to synthesize current knowledge, identify critical gaps, and propose actionable

strategies for leveraging digital technologies to optimize zakat distribution and foster sustainable empowerment

among the Asnaf community in Malaysia.

International case studies have also demonstrated the effectiveness of digital technology in improving the

management of Islamic social finance. For example, the digital transformation of Indonesia’s Badan Amil Zakat

Nasional (BAZNAS) showed an increase in zakat collection of up to 40 percent after the introduction of a digital

platform and mobile application [77]. This initiative has also been shown to increase the reach of assistance to

rural mustahik, improve transaction transparency, and strengthen public trust in zakat institutions. This empirical

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evidence serves as an important reference for Malaysia, demonstrating the great potential of digital technology

to enhance the effectiveness of zakat programs and expand community engagement.

The Role of Islamic Social Finance Initiatives

There has been several initiatives executed by our financial institution such as Bank Islam Malaysia Berhad

(BIMB) which contribute to societal welfare through innovative products like BangKIT Microfinance. The

product aligns with the broader goals of sustainable development and economic inclusion [68]. The

implementation of Islamic banking principle such as al-qardhul hasan or benevolent loan is viewed as a

sustainable financial instrument within zakat fund governance, aligning with the al-maqasid shariah principles

to promote economic empowerment and social inclusion for Asnaf [5]. Such initiatives, particularly when

employing al- qardhul hasan from zakat funds, can directly contribute to achieving Sustainable Development

Goals (SDG) related to poverty alleviation, economic inclusion, and social justice in Malaysia [5]. Hence, the

application of financial technology (fintech) further streamlines the management and investment of Islamic

charity endowments, such as Waqf, presenting a technology-based solution for underserved areas [7].

Recent empirical studies show that implementing blockchain in waqf and zakat management improves audit

trails, reduces leakages, and boosts public trust in Islamic financial organizations. Evidence suggests that

implementing blockchain in the zakat distribution chain enhances transaction traceability and data security.

Islamic social finance tools, particularly waqf and zakat, play an important role in fostering socioeconomic

development by providing resources to asnaf communities through Shariah-compliant processes [76]. The

authors underline that the effectiveness of these instruments is primarily dependent on the level of accountability

and transparency displayed by the organizations in charge of their implementation.

Aligned with broader digital advancements, recent scholarship advocates for the integration of technologies such

as blockchain as a transformative catalyst in waqf governance. Blockchain’s inherent features transparent,

immutable, and decentralized ledger capabilities enhance the integrity, reliability, and traceability of financial

records. These characteristics align with Shariah’s emphasis on trust, justice, and transparency in the

management of communal wealth. The literature consistently emphasizes that digital transformation is not

merely a technical innovation but a strategic governance mechanism capable of reinforcing institutional

credibility and restoring public trust in Islamic social finance entities. Similar implications extend to zakat

administration, which faces parallel challenges in ensuring operational efficiency, transparency, and the effective

delivery of aid to asnaf communities.

Building on this discussion, recent research emphasizes the importance of blockchain in the larger Islamic social

finance ecosystem, notably in the context of zakat payment systems. Their research finds critical factors

influencing institutional and individual adoption of blockchain for zakat transactions, such as perceived utility,

trust, technological preparedness, and regulatory backing. Blockchain-enabled zakat systems not only improve

transparency and efficiency, but also minimize operational friction and boost user confidence in the payment and

distribution processes' integrity [74]. This work adds to the existing literature by addressing the behavioral,

organizational, and regulatory elements that influence effective digital transformation in Islamic social finance.

Collectively, these findings underscore the growing consensus that blockchain adoption is a critical strategic

direction for strengthening governance, improving resource allocation, and ultimately empowering asnaf through

more accountable and technologically resilient zakat and waqf management frameworks.

The Integration of Fintech in the Management of Social Finance Fund

Fintech, encompassing innovations such as blockchain, is increasingly recognized for its potential to enhance

operational efficiency, transparency, and disintermediation within Islamic social finance, especially in the

collection and management of waqf [71]. For example, the integration of fintech solutions into waqf practices

can significantly improve fund mobilization, investment, and disbursement processes, directly connecting

donors to fundraisers and enhancing overall efficiency [71]. This integration offers a compelling avenue for

promoting social justice and economic empowerment, aligning with principles exemplified by Islamic

nanofinance through mechanisms like al- qardul hasan and waqf [34]. These mechanisms, when synergized with

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digital platforms, facilitate accessible and ethical microfinancing, particularly benefiting the B40 and M40

income groups and countering exploitative lending practices [32][34]. The global proliferation of financial

technology has particularly impacted the financial sector, including Zakat institutions. For example, leveraging

mobile banking for efficient distribution to Asnaf in Selangor, Malaysia [69]. The widespread adoption of digital

payment systems offers a strategic pathway for zakat institutions to reach a broader base of beneficiaries,

ensuring that funds are disbursed efficiently and transparently [20].

Furthermore, the strategic use of fintech platforms can significantly reduce administrative overheads associated

with traditional zakat collection and distribution, thereby maximizing the proportion of funds directly benefiting

the Asnaf [31]. This digital transformation is needed for sustaining development, particularly within Islamic

finance, where digitalization and innovation are still nascent yet recognized as essential for achieving societal

well-being and zero poverty [60]. For example, the integration of Fintech, such as blockchain, not only enhances

transactional transparency and reduces costs for Islamic financial institutions but also facilitates innovative

solutions for charitable purposes like Zakat and Waqf collection and distribution [29][63]. These technological

advancements enable greater financial inclusion by making Shariah-compliant financial products and services

more accessible, particularly for those in underserved communities [53].

The Impact of Digital Platform on Social Finance Management

Digital platforms have demonstrably accelerated the growth and impact of cash waqf management, increasing

both public awareness and the benefits derived for community welfare [4]. Such integration also addresses

vulnerabilities like cybercrime and fraud, ensuring secure and ethical financial practices within the Islamic

finance framework [43]. This expanded accessibility, facilitated by digital payment systems and innovative

fintech solutions, is particularly for expanding the reach of Islamic social finance to financially excluded

populations [57]. The continued growth and sophistication of fintech in Islamic finance, including its application

in zakat management, necessitates robust regulation and standardization to ensure ethical compliance and

consumer protection [54]. This is especially pertinent given the potential for fintech to significantly increase

zakat receipts and expand the number of contributors, as observed in various contexts [22][22][54]. The

integration of Islamic fintech, driven by collaboration between government entities, financial institutions, and

technology developers, is crucial for creating an ecosystem that fosters the growth of Islamic financial inclusion

and expands access to Shariahcompliant services [19]. This integration of technology with Islamic ethical

principles provides innovative, transparent, and efficient Shariahcompliant financial solutions, thereby

disrupting traditional financial sectors and promoting economic development [38].

Furthermore, Islamic fintech plays a role in accelerating financial inclusion and sustainable development within

Muslim-majority countries by offering accessible and ethically rich investment opportunities [24][21]. Its further

aids in poverty alleviation and social justice by providing easier and less costly access to Islamic financial

services, keeping pace with the aspirations of the new generation [56]. The rise of Islamic fintech not only

promotes financial literacy but also cultivates entrepreneurship by making finance more accessible to individuals

and businesses, thereby fostering economic empowerment [23]. This technological evolution is critical for

driving the advancement of Islamic finance, encompassing areas such as digital payment systems, crowdfunding,

and asset management, all while adhering strictly to Shariah principles [47]. The widespread adoption of Fintech

in Islamic finance has been significantly accelerated by global events such as the COVID-19 pandemic, which

underscored the critical need for digital financial services to ensure continuity and accessibility [24]. This

accelerated adoption highlights the transformative potential of Islamic fintech in fostering resilience and

innovation within the financial sector [23]. This momentum further necessitates focused educational initiatives

to cultivate specialized expertise in Islamic finance and fintech, supporting sustained growth and awareness

within the market [24].

The Role of Regulatory Framework

The continued development of appropriate regulatory frameworks is essential to support the secure and ethical

expansion of Islamic financial technologies [24]. Such frameworks must balance innovation with safeguarding

consumer interests and maintaining systemic stability, especially in developing economies where Fintech can

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significantly boost economic growth but also increase regulatory complexities [59]. Addressing these

complexities requires a harmonized approach to regulation across jurisdictions, ensuring that Islamic fintech

innovations can scale effectively while adhering to Shariah principles and consumer protection standards

[33][23]. Therefore, a dynamic and adaptable regulatory landscape is imperative to equip the full potential of

Islamic fintech, fostering an environment where innovation thrives within Sharia- compliance [23][38].

Furthermore, the global Islamic fintech market is experiencing substantial growth, with transaction values

projected to reach USD 128 billion by 2025, outpacing conventional fintech at a 21% compound annual growth

rate [24]. This rapid expansion underlines the necessity for continuous regulatory adaptation to accommodate

the burgeoning Shariah-compliant digital financial services landscape [24]. This growth, however, must be

supported by regulatory frameworks that can facilitate innovation while upholding Shariah principles and

consumer protection [23][56].

Malaysia, in particular, has cultivated a wellestablished ecosystem that encourages startups and fosters industry

expansion within the Islamic fintech sector through inclusive policies. According to [23], this proactive approach

positions Malaysia as a hub for Islamic finance, balancing innovation with adherence to Shariah principles

through fintechfriendly regulations. Should comparison were to be made with Indonesia, the country

demonstrates a significant commitment to fostering Islamic fintech, evidenced by its substantial growth in the

Shariah fintech industry, which saw an approximate 130% increase between 2020 and 2021, projected to reach

180% by 2022, positioning it among the top global ecosystems for fintech Despite this growth, Indonesia's

Islamic fintech market size still trails behind nations like Saudi Arabia, Iran, the United Arab Emirates, and

Malaysia This disparity highlights the ongoing need for enhanced regulatory frameworks and supportive policies

in Indonesia to fully capitalize on its Islamic fintech potential, especially considering the challenges of

inadequate regulations, complex licensing, and illegal financial activities These challenges, including legal

uncertainty due to non-specific Islamic fintech lending regulations, highlight the necessity for a more

comprehensive and adaptive regulatory environment to foster sustained growth and innovation within the

Indonesian Islamic fintech sector a framework would ideally encompass consumer protection measures,

transparent dispute resolution mechanisms, and robust data security protocols to build trust and confidence in

Islamic fintech services.

Further complexities arise from the need to harmonize diverse regulatory approaches across different

jurisdictions to prevent arbitrage and ensure consistent Shariah adherence [6][51]. Furthermore, according to

[10], strengthening the infrastructure of the Shariah Fintech system and enhancing the value of financial services

for halal MSMEs is crucial for sustainable growth and open innovation in the Indonesian context This requires

addressing factors such as religiosity, Islamic financial literacy, and risk perception, which significantly influence

the adoption of Shariah Fintech among halal MSME owners. The successful integration of Shariah Fintech

within business operations can also significantly enhance brand image and improve overall business capacity for

these enterprises including leveraging digital platforms to streamline Zakat collection and distribution, thereby

enhancing financial inclusion and economic empowerment for the Asnaf community in Malaysia [42]. Moreover,

the strategic application of Islamic fintech can lead to significant advancements in the efficiency and reach of

Zakat institutions, ensuring a more equitable and transparent distribution of funds to those in need [66].

Enhancing Digital Skill

By fostering greater financial literacy among Asnaf, particularly regarding digital financial tools, the

effectiveness of Zakat distribution can be further amplified, enabling recipients to better manage and grow their

resources [10]. This digital transformation presents both challenges and opportunities for Islamic banking in

achieving sustainable growth, requiring a deep understanding of its socio-economic impacts on Muslim

communities, especially in regions with limited technological infrastructure [64]. Addressing these disparities

necessitates inclusive and sustainable approaches to enhance technological capabilities and digital skills among

Muslim populations. This includes bridging the digital divide through targeted educational initiatives and

providing accessible, Shariah-compliant digital financial products that cater to the specific needs of these

communities [19]. Furthermore, developing robust Islamic financial technologies is essential to enhance

Shariacompliant online market liquidity and improve social finance mechanisms within these communities [18].

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This strategic integration of digital tools with Islamic finance principles can significantly enhance financial

inclusion for micro, small, and medium enterprises, a critical segment often lacking access to conventional

financial services [40]. The advancement of digital technologies, such as e-wallets, mobile banking, and Islamic

fintech applications, plays a crucial role in enabling remote communities to readily access Islamic financial

services, thus promoting financial inclusion [19]. This digitalization also extends to the management of zakat,

where technology and innovation are instrumental in transforming traditional practices into efficient, digitized

systems, ensuring compatibility with the current digital era [58]. This digital transformation in zakat

management, particularly through the adoption of digital platforms and blockchain, promises enhanced

transparency, efficiency, and a broader societal impact on welfare [39][49]. Such digitalized systems offer a

check and balance mechanism for Zakat collection and distribution, ensuring accountability and improving the

developmental impact of Zakat funds [58].

Furthermore, the integration of digital payment systems, online platforms, and mobile applications can

significantly streamline zakat calculations and tracking, thereby optimizing both the collection and distribution

processes [55]. This not only increases compliance but also fosters trust among contributors and beneficiaries,

leading to greater community engagement in Zakah initiatives [3]. The growth of technology and innovation is

thus inevitable, leveraging digital tools for more efficient zakat management systems in Malaysia [58]. The

implementation of digitalized zakat management systems, such as the Zakat on Touch initiative by Lembaga

Zakat Negeri Kedah, exemplifies how technological advancements can empower Asnaf and transform zakat into

a sustainable socioeconomic instrument [41]. These advancements underline the critical need for a

comprehensive digital strategy to overcome existing challenges and fully harness the potential of technology in

elevating the socioeconomic status of Asnaf in Malaysia [45][58]. This transformation, propelled by the

Industrial Revolution in Malaysia and the impact of the COVID-19 pandemic, necessitates that Asnaf

entrepreneurs remain competitive through the mastery of digital marketing and e-commerce platforms [35].

Furthermore, the integration of digital platforms for ZISWAF funds presents significant opportunities for

enhanced transparency and trust in fund management, addressing the need for robust digital infrastructures [15].

The emergence of various Fintech crowdfunding institutions and philanthropic organizations utilizing digital

wallets for Zakat, Infaq, and Sadaqah payments further exemplifies this trend, driven by the increasing adoption

of non-cash payment methods [2].

This shift towards digital transactions necessitates further research into user adoption and behavioral intention

regarding halal blockchain digital wallets within non-bank financial institutions like zakat institutions [62]. This

development highlights the critical importance of evaluating the challenges and strategic directions required for

effective digital transformation within Malaysia's zakat landscape [45]. A thorough understanding of these

challenges and strategic approaches is essential to harness the full potential of digital Zakat in improving the

socioeconomic well-being of the Asnaf community [13]. The integration of digital platforms within zakat

management not only streamlines the collection and distribution processes but also offers a pivotal pathway for

Asnaf entrepreneurs to remain competitive in an increasingly digitized economy, especially in light of global

events such as the COVID-19 pandemic [44] [67]. Proactive initiatives, such as the Human Development

Program by State Islamic Religious Councils, are crucial for enhancing the entrepreneurial potential of Asnaf

groups by aligning with strategies that prioritize both their welfare and economic empowerment [44]. These

initiatives should focus on developing digital literacy and entrepreneurial skills, leveraging technological

advancements to overcome existing socio-economic disparities and foster sustainable economic participation

among Asnaf groups [44][48]. Moreover, tailored entrepreneurial support, including training, capital sources,

and motivational programs, can significantly improve Asnaf's business management skills and contribute to their

socio-economic development [45]. Such advancements necessitate a deeper exploration into the regulatory

frameworks and technological infrastructures required to support and secure these digital transformations within

the Malaysian zakat landscape [1][13].

Challenges and Strategic Directions for Empowering Asnaf

Current discussion is rooted into the socio- economic impact of digitalized zakat on Asnaf empowerment,

critically analyzing both the opportunities and obstacles presented by this technological paradigm shift. It will

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further shed some lights on how digital platforms can enhance financial inclusion and entrepreneurial success

among Asnaf individuals, thereby contributing to sustainable poverty alleviation efforts [26]. Additionally,

present study shall also review the current zakat management systems in Malaysia, particularly how they

leverage digital innovation to address poverty and economic inequality among Asnaf, given their varied

management systems influenced by social, cultural, and regulatory characteristics. This comparative analysis

across different systems will reveal the best practices and areas for improvement, particularly regarding

infrastructure readiness and the impact of socio-economic disparities on effective distribution [14]. Specifically,

the review will assess how robust digital infrastructures and equitable access to technology can bridge existing

gaps in zakat distribution efficiency and recipient outreach [15], transformation of zakat institutions from

traditional models to modern corporate-style management, acknowledging the shift towards computerized

systems and contemporary payment channels that have enhanced efficiency and transparency but still raise

public concern regarding credibility [61] and [30].

Furthermore, despite technology advancements, ensuring the integrity and accountability of digital zakat

platforms remains paramount for maintaining public trust and encouraging broader participation in philanthropic

initiatives [61]. Therefore, the continued evolution of zakat institutions demands a comprehensive understanding

of both technological integration and the underlying Shariah principles to ensure effective and sustainable Asnaf

empowerment [28][36]. The integration of digital accounting practices can significantly enhance financial

transparency, which in turn strengthens corporate sustainability efforts by providing clear insights into a

company's commitment to such initiatives. This enhanced transparency, alongside the strategic adoption of

digital zakat, also positively influences corporate sustainability outcomes and encourages broader philanthropic

engagement [11]. Such digital advancements in zakat collection and distribution are critical for addressing the

growing complexity of contemporary social issues, including poverty alleviation and sustainable. Specifically,

digital zakat acts as a catalyst for increased stakeholder engagement, fostering a participatory ecosystem for

sustainable development [12]. This comprehensive approach not only ensures efficient resource allocation but

also fosters a dynamic interaction between zakat institutions, corporations, and beneficiaries, thereby solidifying

the social impact of these financial instruments.

A synergistic model integrating Islamic accounting and financial innovation could significantly enhance the

competitiveness and operational efficiency of Sharia business entities, particularly SMEs, by facilitating rapid

and accurate financial reporting and decision-making processes [46]. Such integration also ensures adherence to

Sharia principles and aids in fulfilling social obligations, including zakat, infaq, and sadaqah [46]. This

convergence of Islamic accounting and financial innovation also points to an enhancement in the decision

usefulness of non-financial information, aligning with concepts of creating shared and sustainable value for

various stakeholders [52][46]. This integration is further bolstered by the potential of emerging technologies

such as blockchain, which offers enhanced transparency, security, and efficiency in Islamic social finance

processes, including zakat management [49].

CONCLUSION

Islamic social finance mechanisms, such as zakat and waqf, are vital for achieving sustainable development

goals, particularly in poverty alleviation and social welfare enhancement. Despite its recognized potential, the

growth and utilization of Islamic social finance instruments, including Zakat and Waqf, remain suboptimal when

compared to the broader Islamic finance industry. The integration of Islamic social and commercial finance,

though still developing, is important for addressing economic and social issues within the global Muslim

community. This integration offers a robust framework for poverty alleviation, wealth redistribution, and

promoting financial inclusion within Islamic economies, aligning with the broader objectives of sustainable

development. This alignment is further strengthened by the explicit recognition within Islamic finance of its

potential to contribute significantly to the Sustainable Development Goals through ethical financial practices

and robust governance. This underutilization necessitates a strategic reevaluation of operational and regulatory

frameworks to maximize their developmental impact. This underscores the pressing need for innovative

approaches and enhanced collaboration among stakeholders to fully leverage Islamic social finance for

comprehensive sustainable development.

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To this end, a comprehensive bibliometric analysis of Islamic social finance publications reveals an encouraging

annual growth rate of 9.26%, with Malaysia demonstrating significant contributions to this expanding field. This

trend highlights Malaysia's pivotal role in advancing the theoretical and practical applications of Islamic social

finance as a tool for sustainable development. Specifically, initiatives like Bank Islam Malaysia Berhad's

BangKIT Microfinance product exemplify efforts to integrate Islamic social finance with microfinance to

address poverty alleviation and promote financial inclusion within the broader Islamic social finance framework.

This product provides an Islamic microfinance solution to Asnaf entrepreneurs, which also incorporates an

element of zakat to subsidise the profit rate, thus embodying a unique approach to sustainable financing. This

innovative blend of microfinance and zakat highlights the potential of Islamic social finance instruments to

enhance financial inclusion, which is critical given that the levels of zakat and cash waqf indicator indexes for

financial inclusion in Malaysia remain relatively low. In conclusion, the integration of zakat and digital

transformation presents a significant opportunity to overcome these challenges and empower the Asnaf

community effectively. This approach aligns with strategic zakat management practices that leverage structured

governance and innovative digital solutions to enhance socioeconomic development, as demonstrated by leading

Islamic social finance institutions. This strategic integration not only streamlines the distribution of zakat but

also amplifies its impact on poverty alleviation and economic empowerment for the Asnaf, fostering a more

inclusive financial ecosystem. The effective implementation of digital platforms can further enhance the

transparency and efficiency of zakat distribution, ensuring that funds reach eligible recipients swiftly and

securely. This digital transformation also facilitates comprehensive data collection, enabling more precise needs

assessments and impact measurement for improved allocation of resources. Such digitalization efforts in zakat

management are crucial for expanding Islamic financial inclusion and leveraging technology to generate greater

economic and social benefits, mirroring successful strategies in other developing economies. Specifically, the

embracing of digitalization within the zakat system is vital for its compatibility with the contemporary digital

era, aligning with evolving financial markets and introducing new business models. This strategic shift towards

digital platforms is essential for empowering Asnaf entrepreneurs to remain competitive in a rapidly evolving

marketplace, particularly given the changes in consumer behavior towards digitized purchases and the imperative

to master digital marketing. This transition from traditional to digital markets offers a pathway for zakat

institutions to advance their technological readiness and understanding, thereby embracing digital assets and

their zakat-ability. Therefore, Asnaf must make sure their evolving on technological readiness up to par in order

to privileging the competitive advantages [78].

Empirical findings and case studies demonstrate that digitalization not only improves the technical aspects of

zakat management but also has a substantial impact on Asnaf's social and economic well-being. However, there

are still few studies on the long-term usefulness of digital technology in Malaysian zakat management,

particularly those that analyze the influence on Asnaf's socioeconomic development over time. Thus, a more

extensive literature synthesis, such as the one undertaken in this study, is required to identify the strategic needs,

knowledge gaps, and potential of digital technology in boosting the Malaysian zakat ecosystem.

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