ADVANCING SUSTAINABLE FINANCE THROUGH ZAKAT: ISSUES AND CHALLENGES FROM THE MALAYSIAN ZAKAT ECOSYSTEM
DOI:
https://doi.org/10.35631/AIJBES.829030Keywords:
Zakat, Sustainable Finance, Islamic Social Finance, ESG, Accountability, MalaysiaAbstract
Sustainable finance has emerged as a global agenda for the promotion of environmental sustainability, social inclusion, and economic resilience. The function of Islamic social finance, particularly zakat, remains underexplored, despite the fact that existing studies have primarily concentrated on environmental, social, and governance (ESG) investing and green finance. Zakat has the potential to significantly contribute to sustainable development by promoting social inclusion, poverty alleviation, and equitable wealth distribution as a compulsory wealth redistribution mechanism. Nevertheless, prior research has primarily focused on the governance and distribution efficacy of zakat, with a limited focus on its potential to promote sustainable finance. This conceptual paper analyses the potential and challenges associated with positioning zakat as a sustainable finance instrument within the Malaysian zakat ecosystem by conducting a conceptual review of the literature on Islamic social finance and sustainable finance. The paper emphasises critical issues concerning governance, accountability, and social performance, and it explores the implications of these issues for the improvement of zakat's contribution to sustainable and inclusive socio-economic development.
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