Journal of Integrated Socio-Economic Systems and Islamic Finance

Vol. 1 (2025)
Articles

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

PDF
  • Magda Ismail Abdel Mohsin,
  • Shamimi Mohd Zulkarnaini
Magda Ismail Abdel Mohsin
Centre of excellence Islamic Social Finance, ISRA Institute, INCEIF University, Kuala Lumpur, Malaysia
Shamimi Mohd Zulkarnaini
Centre of excellence Islamic Social Finance, ISRA Institute, INCEIF University, Kuala Lumpur, Malaysia; IIUM Institute Islamic Banking and Finance, IIUM, Kuala Lumpur, Malaysia

Published 2025-12-26

How to Cite

Islamic Social Finance as a Catalyst for Inclusive and Sustainable Growth: Regional Best Practices from Asia. (2025). Journal of Integrated Socio-Economic Systems and Islamic Finance, 1, 116-128. https://doi.org/10.65638/2978-8196.2025.01.09

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.

PDF

References

  1. Abd. Wahab, N., & Abdul Rahman, A. R. (2011). A framework to analyse the efficiency and governance of zakat institutions. Journal of Islamic Accounting and Business Research, 2(1), 43-62. https://doi.org/10.1108/17590811111129508
  2. Adinugraha, H. H., & Shulhoni, M. (2023). Islamic social finance in Indonesia: Opportunities, challenges, and its role in empowering society. Review of Islamic Social Finance and Entrepreneurship, 45-62. https://doi.org/10.20885/RISFE.vol2.iss1.art4
  3. Akram, M. M., & Afzal, M. (2014). Dynamic role of zakat in alleviating poverty: A case study of Pakistan. Munich Personal RePEc Archive. https://mpra.ub.uni-muenchen.de/
  4. Andriyanto, I., & Islamiah, M. H. (2024). Optimizing zakat management through integration of zakat core principles, digital transformation, and internal control: A case study of BAZNAS. In Proceedings of the International Conference on Research Issues and Community Service (ICORES) (pp. 275-280).
  5. Azman, S. M. M. S., & Ali, E. R. A. E. (2019). Islamic social finance and the imperative for social impact measurement. Al-Shajarah, 25(1), 43-69.
  6. Bank Negara Malaysia. (2022). Islamic financial outlook: Digitalization and social finance. Kuala Lumpur: BNM.
  7. Dembele, A., & Bulut, M. (2021). The role of Islamic social finance in achieving the objectives of sustainable development goals. Turkish Journal of Computer and Mathematics Education, 12(14), 3962-3976.
  8. Djalaluddin, A., Kholilah, K., Danila, N., & Andriani, S. (2023). Actualization of Islamic social finance during disasters: The COVID-19 pandemic’s lessons in Indonesia. IQTISHODUNA: Jurnal Ekonomi Islam, 12(2), 371-392. https://doi.org/10.54471/iqtishoduna.v12i2.2469
  9. Elo, S., & Kyngäs, H. (2008). The qualitative content analysis process. Journal of Advanced Nursing, 62(1), 107-115. https://doi.org/10.1111/j.1365-2648.2007.04569.x
  10. Fauziaha, N. N., Engku Alib, E. R., Alvierra, A. A. B. M., & Bachad, A. M. (2021). An analysis of cash waqf linked sukuk for socially impactful sustainable projects in Indonesia. Journal of Islamic Finance, 10(1), 1-10. https://doi.org/10.31436/jif.v10i.521
  11. Hamed, M. M. (2020). The role of Islamic social finance in mitigating humanitarian crises: A multi-range strategy to mitigate COVID-19 impacts. European Journal of Islamic Finance, (16), 1-10.
  12. Hassan, M. K. (2021). Artificial intelligence in Islamic finance: Prospects and challenges. Journal of Islamic Economics, 45(3), 67-89.
  13. Hudaefi, F. A., Zaenal, M. H., Farchatunnisa, H., & Junari, U. L. (2019). How does zakat institution respond to fintech? Evidence from BAZNAS Indonesia. International Journal of Zakat, 4(1), 1-14.
  14. Indonesian Waqf Board. (n.d.). Retrieved from https://www.bwi.go.id/
  15. Islamic Aid. (n.d.). Retrieved from https://islamicaid.com/
  16. Khalil, S., & Haron, R. (2010). Islamic microfinance: An emerging tool for poverty alleviation. Journal of Islamic Economics, Banking and Finance, 6(1), 45-64.
  17. Millatina, A. N., Budiantoro, R. A., Hakim, R., & Putra, F. S. (2022). Blockchain zakat: An integrated financial inclusion strategy to manage Indonesia’s potential zakat funds. Jurnal Ekonomi dan Bisnis, 25(1), 89-112. https://doi.org/10.24914/jeb.v25i1.4111
  18. Nawaf, S., Susheillawati, A., & Sari, R. L. (2023). Digital transportation of zakat management at BAZNAS in Tegal District. In Proceedings of the 6th International Conference of Zakat (ICONZ) (pp. 275-323).
  19. Oseni, U. A., & Ali, S. N. (2019). Fintech in Islamic finance: Theory and practice. Routledge. https://doi.org/10.4324/9781351025584
  20. Obaidullah, M., & Shirazi, N. S. (2015). Islamic microfinance development: Challenges and policy recommendations. Islamic Research and Training Institute.
  21. Patton, M. Q. (2015). Qualitative Research & Evaluation Methods (4th ed.). SAGE Publications.
  22. Rahman, A. A., Alias, M. H., & Omar, S. M. N. (2012). Zakat institution in Malaysia: Problems and issues. GJAT, 2(1), 22-41.
  23. Rahman, A., & Kassim, S. (2020). Zakat and digital payments: A case study of Malaysia. International Journal of Islamic Finance, 12(2), 145-161.
  24. Schreier, M. (2012). Qualitative Content Analysis in Practice. SAGE Publications. https://doi.org/10.4135/9781529682571
  25. Tok, E., Yesuf, A. J., & Mohamed, A. (2022). Sustainable development goals and Islamic social finance: From policy divide to policy coherence and convergence (Version 1). Manara - Qatar Research Repository. https://doi.org/10.3390/su14116875
  26. Vaismoradi, M., Turunen, H., & Bondas, T. (2013). Content analysis and thematic analysis: Implications for conducting a qualitative descriptive study. Nursing & Health Sciences, 15(3), 398-405. https://doi.org/10.1111/nhs.12048
  27. Dompet Dhuafa. (n.d.). Retrieved from https://www.dompetdhuafa.org/
  28. Social Islamic Bank Limited (SIBL). (n.d.). Retrieved from https://www.siblbd.com/
  29. Akhuwat Foundation. (n.d.). Annual Reports. Retrieved from https://www.akhuwat.org.pk/
  30. Al-Khidmat Foundation. (n.d.). Reports. Retrieved from https://alkhidmat.org/
  31. Additional References
  32. Financial Times. (2024). Meezan Bank’s soaring shares herald rise of Islamic finance in Pakistan. https://www.ft.com/content/6161c462-550f-482d-b364-d4be6a7e6359
  33. UNDP. (2012). Scaling up Islamic microfinance in Bangladesh through the private sector: Experience of Islami Bank Bangladesh Limited (IBBL). https://www.undp.org/sites/g/files/zskgke326/files/publications/Bangladesh_D10_web.pdf
  34. UNDP. (2022). 7 things you didn’t know about Islamic finance in Indonesia. https://www.undp.org/indonesia/blog/7-things-you-didnt-know-about-islamic-finance-indonesia
  35. UNDP. (2022). Innovations in Islamic social finance and opportunities for Türkiye. https://www.undp.org/malaysia/press-releases/innovations-islamic-social-finance-and-opportunities-turkiye-panel-organized-tkbb-isdb-and-undp-malaysia
  36. UNDP. (2023). UNDP Indonesia-Malaysia case studies on innovations in Islamic finance. https://www.undp.org/indonesia/publications/undp-indonesia-malaysia-case-studies-innovations-islamic-finance
  37. UNDP. (2024). Exploring innovations in Islamic finance: A path towards sustainable development. https://www.undp.org/malaysia/stories/exploring-innovations-islamic-finance-path-towards-sustainable-development
  38. Wikipedia contributors. (2024). Aisyiyah. In Wikipedia, The Free Encyclopedia. https://en.wikipedia.org/wiki/Aisyiyah
  39. Wikipedia contributors. (2024). Akhuwat Foundation. In Wikipedia, The Free Encyclopedia. https://en.wikipedia.org/wiki/Akhuwat_Foundation
  40. Wikipedia contributors. (2024). Islami Bank Bangladesh. In Wikipedia, The Free Encyclopedia. https://en.wikipedia.org/wiki/Islami_Bank_Bangladesh