Islamic Social Finance as a Catalyst for Inclusive and Sustainable Growth: Regional Best Practices from Asia

Abstract

Islamic Social Finance (ISF), encompassing zakat, waqf, sadaqah, and Qard al-Hasan, has demonstrated measurable contributions to poverty alleviation, education, healthcare access, and economic empowerment across Asia. This study employs a qualitative content analysis approach, reviewing peer-reviewed articles, institutional reports, policy papers, and case studies from Indonesia, Bangladesh, Pakistan, and Malaysia (2010–2025). A structured coding protocol was used to extract information on governance models, fintech integration, waqf monetization, microfinance designs, outcomes/KPIs, enablers/barriers, and linkages to Sustainable Development Goals (SDGs). The analysis identifies transferable best practices: Indonesia’s BAZNAS digitized zakat collection via QR payments and e-commerce partnerships, improving transparency and coverage; Malaysia’s centralized SIRC governance mobilized over RM 2.5 billion in zakat in 2020 for scholarships, healthcare, and entrepreneurship programmes; Pakistan’s Akhuwat disbursed over four million interest-free microloans, enhancing household incomes; Bangladesh’s SIBL cash waqf funds financed schools and clinics, delivering scholarships and subsidised healthcare in rural communities; and Malaysia’s AI-assisted targeting of beneficiaries improved allocation efficiency and impact measurement. These interventions align with SDGs 1, 3, 4, 8, and 10, demonstrating how Digital Centralization, Cash Waqf PPP Models, Holistic Qard al-Hasan, Data-Driven Targeting, and Standardized Governance and Audit can be adopted across contexts. In conclusion, integrating ISF instruments within coherent governance, digital, and operational frameworks enhances their scalability and effectiveness, offering policymakers and practitioners actionable strategies for advancing inclusive and sustainable socio-economic development globally.