Alliance Islamic Bank Berhad (Alliance Islamic Bank) today launched the Alliance Islamic Bank Zakat Microfinancing Programme (AZAM), Malaysia’s first zakat microfinancing programme.
The programme utilises zakat wakalah to uplift asnaf (underprivileged) micro-entrepreneurs in the country and promotes financial inclusion and equitable development through the provision of accessible and affordable financing opportunities.
According to the Securities Commission Malaysia (SC), micro, small and medium enterprises (MSMEs) are a key driver of the Malaysian economy, contributing over a third of Malaysia’s national Gross Domestic Product (GDP).
“The availability of suitable financing options available to MSMEs remains sparse with an estimated financing gap of RM90 billion.
“In 2022, close to RM4 billion in total zakat was collected by various zakat institutions and when strategically harnessed, is able to bridge this financing gap for underserved business owners in the B40 segment,” it said today in a statement.
The bank said AZAM is introduced as an innovative approach to zakat whereby it is productively distributed via microfinancing through a revolving fund structure, setting a precedent in how zakat is harnessed to help asnaf micro-entrepreneurs.
“The programme targets eligible asnaf micro-entrepreneurs and is disbursed in accordance with the Qard concept (repayment without interest or profit).
“Repayments are then channelled into the pool, simultaneously expanding the programme’s impact by supporting more qualified asnaf entrepreneurs and ensuring the sustainability of zakat funds.
“Aligned with the principles and goals of value-based intermediation (VBI), AZAM intends to create a greater socio-economic impact and achieve the intended outcomes of Shariah by ensuring the distribution of wealth in a just and effective manner.
Its chief executive officer Rizal IL-Ehzan Fadil Azim said zakat is an essential economic instrument that helps bridge the wealth gap within the community through financial inclusion.
“We pioneered the programme with the endorsement and guidance of expert parties to productively distribute zakat to asnaf micro-entrepreneurs while helping them to develop a sustainable source of income and escape poverty,” he said.
Alliance Islamic Bank also signed a Memorandum of Understanding (MoU) with Amanah Ikhtiar Malaysia (AIM) as the strategic microfinancing partner in a ceremony witnessed by Lembaga Zakat Selangor (LZS).
AIM, the largest microfinance institution in Malaysia is responsible for overseeing several aspects of AZAM including screening of beneficiaries and providing the infrastructure for fund disbursement and collections while LZS verifies asnaf beneficiaries.
LZS chief executive officer Mohd Sabirin Mohd Sarbini said the collaboration between Alliance Islamic Bank and AIM enables an innovative social funding model that is Shariah-compliant and has the ability to reach and assist asnaf communities achieve a stable livelihood; transforming them into future zakat payers.
“We hope that this Programme encourages more private-public collaborations that can uplift the livelihood of the asnaf communities and contribute to the overall welfare of society,” said Mohd Sabirin.
The programme pilots the concept first introduced via the bank’s ‘Zakat and Microfinance’ book published in September 2022.
Following research, the bank submits a proposal to the Selangor Fatwa Council to develop this Islamic social funding model and obtained approval, to culminate into the launch of the programme.
The bank said it will bear all management costs associated with the programme and is allocating a total of RM225,000 zakat wakalah through a revolving fund to benefit an initial 45 asnaf micro-entrepreneurs.
Eligible asnaf micro-entrepreneurs who require working capital or capital expenditure support can access up to RM5,000 in zakat microfinancing funds.
AIM managing director Mohamed Shamir Abdul Aziz said to further assist the asnaf micro-entrepreneurs, the programme includes upskilling modules on areas such as business and financial management and marketing.
“Our collaboration enables us to assist low-income micro-entrepreneurs enhance their business skills through training and monitoring sessions,” he added.
AZAM complements the banks ongoing efforts to empower communities through education, upskilling, funding, among others.
It had previously launched SocioBiz, a Shariah-compliant social funding platform that was launched in 2019 has managed to raise close to RM1.7 million for 1,700 asnaf entrepreneurs and recipients.
