Last year, several alleged zakat fund misuse cases made headlines. In Bintulu, a civil servant was detained for allegedly pocketing RM5,000 meant for over 100 students[1]. Meanwhile, in Ipoh, a couple appointed as zakat agents were arrested for allegedly misappropriating RM9.62 million in tithe collections[2].
These cases echo a larger concern: Is zakat in Malaysia truly reaching those who need it most?
Meanwhile, the story of Umar bin Abdul-Aziz, the eighth Umayyad caliph, is often cited as the golden standard of zakat’s potential. During his brief reign, poverty was so scarce that zakat funds exceeded demand. But in today’s Malaysia, we’re far from that vision[3].
So, where does Malaysia stand? Are we collecting zakat to its full potential, or are systemic inefficiencies and public mistrust holding us back?
Understanding Zakat: Purpose and Process
Zakat is not merely an act of charity in Islam; it is one of the faith’s five fundamental pillars. Designed to purify one’s wealth, zakat plays a crucial role in promoting social equity by redistributing wealth from the affluent to those in need[4].
There are two types of zakat: zakat fitrah and zakat harta. The former, typically paid during the holy month of Ramadan before the Eid prayers, is a small levy required of all Muslims each year, regardless of age, gender, or wealth. The latter, meanwhile, is paid only once a year by those who meet the minimum requirements.
Zakat harta includes several categories such as zakat on earnings, business, savings, gold and silver, among others. Muslims who meet the nisab – the minimum amount of wealth and possessions required are obligated to contribute 2.5% of their income as zakat.[4]
Furthermore, it is important to note that zakat cannot be paid to simply anyone or everyone. There are eight specific categories of people who can receive zakat. These include:
- The Poor (Al-Fuqara): Those who live below the poverty line and struggle to meet basic needs.
- The Needy (Al-Masakin): People who have no possessions or income and rely entirely on assistance.
- Zakat Collectors: Individuals or institutions appointed to collect and distribute zakat.
- New Converts to Islam: Those who have recently embraced Islam and may need support as they adjust to a new way of life.
- Captives or Slaves: Zakat can be used to help free those in bondage or victims of human trafficking.
- Debtors: People overwhelmed by debt who cannot repay it, as long as the debt was not incurred for un-Islamic purposes.
- Those in the Path of Allah: Individuals striving for the cause of Allah, such as volunteers or those spreading Islamic teachings.
- Wayfarers (Travellers): Stranded travellers or refugees in need of financial help while far from home.[5]
Who’s Managing the Zakat Millions?
In Malaysia, zakat is managed by each state’s State Islamic Religious Council (SIRC). Most states, such as Selangor, operate through dedicated bodies like Lembaga Zakat Selangor (LZS), which handle collection and distribution under the SIRC’s oversight[6]. Kedah is the exception, with zakat affairs independently managed by the Kedah State Zakat Board (LZNK)[7].
To understand the system at work, Wiki Impact spoke with an LZS officer (who requested anonymity).
In 2023, LZS collected RM1.12 billion in zakat contributions, the highest ever recorded by the state. This marked a 4.2% increase compared to RM1.08 billion in 2022[8].
That same year, LZS’ zakat distribution benefited over 70,600 asnaf families, with RM777 million, nearly 70% of total funds channelled into social aid like monthly support, food, and healthcare. Over 3,600 families broke free from poverty.
Although not legally required, LZS has created an Internal Audit Division to ensure accountability. Annual audits are conducted by the National Audit Department and a prominent account firm, and additional biannual reviews are done as part of its ISO certification. An Audit Committee reviews all findings quarterly.
Zakat Has Yet To Reach Its Full Potential
According to Dr. Muhammad Fathullah Al Haq Bin Muhamad Asni, a senior lecturer in Islamic Studies at Universiti Sains Malaysia, Malaysia has yet to reach its full zakat collection potential. Despite a structured system, a significant gap remains between the country’s GDP and actual zakat revenue.
Dr. Fathullah attributes this shortfall to several factors. First is the lack of awareness among eligible individuals and businesses. Even though fatwas (religious rulings) have been gazetted, weak enforcement limits their impact.
The collection also varies by state. Some states perform better due to awareness and system efficiency, while others fall short. Interestingly, affluent regions like Selangor, the Federal Territories, and Penang underperform when comparing income levels to zakat contributions.
The Confusion Around Where to Pay
Another complication arises when Muslims pay zakat to their preferred state rather than the one where they work, which is the jurisdiction where they are religiously obligated to pay, according to most state Mufti Departments and the guidance of the Ulil Amri (those in authority). Dr. Fathullah explained that this occurs because not all fatwas are gazetted or enforced, leaving room for interpretation.
This mismatch causes an uneven distribution of funds.
Some states receive excess zakat income despite having fewer people in need, while others with a large Muslim population and higher poverty levels struggle with limited zakat funds. – Dr. Muhammad Fathullah Al Haq Bin Muhamad Asni, USM Senior Lecturer.
This, he noted, is partly because individuals are choosing to pay zakat in different states, undermining the impact of zakat where it’s most needed.
Public Trust and the Risk of Corruption
These issues, along with past misuse cases, have affected public trust. However, institutions like LZS are actively addressing internal misconduct. The agency offers five whistleblowing channels, such as email, online forms, anonymous meetings, a phone hotline, and direct contact with integrity officers, to promote accountability.
Dr. Fathullah also pointed out how political affiliations can impact public confidence in zakat institutions.
If a person supports the opposition, they may not trust a zakat board chaired by someone affiliated with the ruling party. In such cases, some individuals may opt to pay zakat in a different state altogether. – Dr. Muhammad Fathullah Al Haq Bin Muhamad Asni, USM Senior Lecturer.
An LZS officer shared that, in his experience, public confidence has increased over the years, thanks in part to full audits and transparency.
We publicly disclose our financial figures and governance practices, which follow the Malaysian Corporate Governance best practices guidelines. This transparency has helped assure the public of their accountability. – Anonymous LZS officer.
At the same time, he also noted that the auditing process at Lembaga Zakat Selangor and likely at other state zakat institutions as well is highly rigorous, efficient, and most notably, frequent. Drawing from his experience in the private sector, he observed that audits were not conducted as regularly elsewhere.
That’s how Zakat Selangor manages the money entrusted by zakat payers with great care and accountability. We value transparency and conduct regular audits. – Anonymous LZS officer.
Data Gaps and Outreach Struggles
A major concern raised by a zakat officer from LZS is the lack of synchronisation between zakat data systems, not just within Selangor, but across all states. Because Islamic affairs fall under state jurisdiction, each state operates its zakat collection and distribution independently. This siloed structure has led to disjointed systems, making coordination difficult.
We have our own digital systems for zakat assistance, but they aren’t synced with agencies like the National Registration Department (JPN). So when someone updates their IC address or contact details through JPN, it doesn’t automatically reflect in our records. – Anonymous LZS officer.
This disconnect means that zakat institutions cannot verify whether recipients (asnaf) are already receiving assistance from other government sources.
If LZS wanted to verify whether an asnaf had received any other form of government aid, they wouldn’t be able to check directly due to the systems not being linked. – Anonymous LZS officer
He stressed that this gap often results in eligible individuals being unintentionally excluded from receiving aid, especially when their information is outdated.
We always remind asnaf to update their information, like address or phone number, at least once a year, either online or by visiting one of our branches. – Anonymous LZS officer
Beyond the issue of outdated data, the lack of ongoing monitoring and follow-up also hampers impact. Dr. Fathullah observed that while institutions are giving out business grants, post-assistance support is often missing.
Institutions often give out business grants, but they don’t follow up with training, mentoring, or workshops. That kind of development is still lacking, possibly due to staffing constraints. – Dr. Muhammad Fathullah Al Haq Bin Muhamad Asni, USM Senior Lecturer
He suggests that zakat bodies could collaborate with microfinancing institutions like Majlis Amanah Rakyat (MARA), Tabung Ekonomi Kumpulan Usaha Niaga (TEKUN), or Amanah Ikhtiar Malaysia (AIM), which already have the infrastructure and expertise to support micro-enterprises.
Zakat institutions can provide the capital, pay a small administrative fee, and let these agencies manage the funds professionally. It’s a much more efficient way to achieve sustainable financial independence for asnaf. – Dr. Muhammad Fathullah Al Haq Bin Muhamad Asni, USM Senior Lecturer
The same LZS officer echoed the limitations of outreach. Despite efforts such as SMS blasts and official letters, some asnaf remain unreached due to outdated contact information. While on-the-ground officers, Eksekutif Agihan Daerah, are tasked with assisting, the numbers aren’t sufficient.
When they (asnaf) forget to renew their applications, or we can’t reach them due to outdated contact info, that’s when problems arise. All of this could be avoided if we had a better, centralised data management system. – Anonymous LZS officer
Each district only has around 10 officers serving thousands of recipients, making it difficult to maintain regular, personal follow-up.
Pushing Forward: Reforming A Flawed But Promising System
Dr. Fathullah believes zakat institutions must move beyond one-off handouts and focus on long-term solutions. That means more funding for income-generating projects, not just handing out cash and hoping for the best.
Some states like Selangor, Kedah, and Melaka already use Qard al-Hasan (interest-free loans) to encourage financial responsibility, but others still favour grants, which are harder to track and sustain.
Transparency is another cornerstone. While LZS is piloting tools like Power BI to visualise its data more effectively, these efforts have yet to be made public. Legal reform, Dr. Fathullah notes, is necessary to mandate impact audits and performance reporting across all zakat institutions.
And with emerging technologies like blockchain, there’s potential to revolutionise how zakat is tracked and trusted, if the will to innovate exists.
Zakat has the potential to create real change, but only if it’s backed by good data, good governance, and a genuine commitment to justice. – Dr. Muhammad Fathullah Al Haq Bin Muhamad Asni, USM Senior Lecturer
Zakat was designed to be a lifeline, not a lottery. For Malaysia, the next step isn’t just better systems, it’s reclaiming the spirit of zakat itself: compassion, accountability, and collective uplift.
Written by Noor Ainun Jariah Noor Harun
Explore our sources:
- A. Jay. (2024). Civil servant held for alleged misuse of zakat fund. Sarawak Tribune. Link
- Bernama. (2024). Zakat collection agents remanded 7 days over alleged RM9.62mil misappropriation. New Straits Times. Link
- National Zakat Foundation. (n.d.). [ARCHIVE] When Islam eradicated Poverty: Umar b. Abdul Aziz & Zakat. Link
- Ringgitplus. (2019). Everything You Need to Know About Zakat in Malaysia. RinggitPlus. Link
- Muslim Global Relief. (n.d). Homepage Website: Give Zakat To The Needy. Link
- M. N. Paizin. (2022). Decentralization in Malaysia’s Zakat Organizations: A Comparison of Zakat Collection Achievements. International Journal of Zakat Vol. 7(1) page 33-46. Link
- I. M. Saidon, J. K. Shanmugam & M. A. Osman. (2024). The Management of Zakat Institutions in Malaysia: A Systematic Literature Review and Future Research Agenda. RSIS International. Link
- Lembaga Zakat Selangor 2023 Report. Link.
