By BERNAMA / Pic By ISMAIL CHE RUS
The use of elements of Islamic social finance, such as sadaqah (charitable acts) and waqaf (endowment) as new funding options for riskier assets like Islamic business start-ups, needs to be strengthened and formalised.
International Centre for Education in Islamic Finance president and CEO Prof Datuk Dr Mohamed Azmi Omar said even though the environment of Malaysia’s Islamic finance is vibrant, it needs to look into another segment, namely Islamic social finance.
With the zakat (tithe) collection globally reaching US$500 billion (RM2.07 trillion) per annum, Islamic philanthropy has been proposed by some to be used to fund riskier assets such as Islamic business start-ups.
Commenting on the suggestion, Mohamed Azmi said this is questionable as it does not meet the eligibility criteria of eight categories of asnaf (deserving recipients) according to Islamic tenets.
They are the poor; the needy; zakat administrators; Muslim converts; slaves and captives; debt-ridden individuals; those sacrificing in the cause of Islam; and the wayfarers.
“ If the financial aid does not fit the eight criteria of deserving recipients, zakat cannot be disbursed (to fund riskier assets). Islamic social finance is a broad (sector) and there are other components that could be used.
“I would suggest the use of sadaqah, infaq (a religious-based circumstantial, voluntary or social obligations) or waqaf for the purpose,” he told Bernama on the sidelines of the Global Islamic Finance Forum 2018 in Kuala Lumpur.
The idea of using these funds has been tossed about in Malaysia, while in some countries, the companies have been categorised under the fourth sector and their management is undertaken by an institution.
“For instance, in Turkey, there were hospitals, schools and other (facilities) funded by these funds. As for Malaysia, we are still at the infancy level and we have just started working on corporate waqaf, that’s it,” he said.
On another note, he said there is a need to embrace new technology such as blockchain into Islamic social finance practice to address the issue of trust, including in the payments and distribution of zakat. — Bernama