Utilisation of zakāh and waqf fund in micro-takāful models in Malaysia: an exploratory study

Said Adekunle Mikail (Research Affairs Department, International Shari’ah Research Academy for Islamic Finance, Kuala Lumpur, Malaysia)
Muhammad Ali Jinnah Ahmad (Research Affairs Department, International Shari’ah Research Academy for Islamic Finance, Kuala Lumpur, Malaysia)
Salami Saheed Adekunle (International Centre for Education in Islamic Finance, Kuala Lumpur, Malaysia)

ISRA International Journal of Islamic Finance

ISSN: 2289-4365

Article publication date: 10 July 2017




This paper aims to investigate the utilisation of both zakāh and waqf fund as external resources to ensure micro-takāful services are delivered to underserved communities in an effective and sustainable manner. It also addresses Sharīʿah issues related to the zakāh- and waqf-based model.


The study is a qualitative-based research. It uses both focus group and content analysis approach to gather primary data and identify and interpret relevant secondary data and Sharīʿah concepts in developing the zakāh- and waqf-based micro-takāful model.


It is discovered throughout the investigation of attributes of beneficiaries of zakāh and waqf institutions as well as micro-takāful scheme that all share commonalities in terms of social securities and socio-economic support to low-income households in societies. The study also finds that the disintegration of zakāh and waqf which form part of the Islamic ecosystem from the micro-takāful model makes it less effective and sustainable.


This study appears as a primitive attempt to discuss and develop a zakāh and waqf-based micro-takāful model with reference to Malaysian jurisdiction.



Mikail, S.A., Ahmad, M.A.J. and Adekunle, S.S. (2017), "Utilisation of zakāh and waqf fund in micro-takāful models in Malaysia: an exploratory study", ISRA International Journal of Islamic Finance, Vol. 9 No. 1, pp. 100-105. https://doi.org/10.1108/IJIF-07-2017-010



Emerald Publishing Limited

Copyright © 2017, Said Adekunle Mikail, Muhammad Ali Jinnah Ahmad and Salami Saheed Adekunle


Published in the ISRA International Journal of Islamic Finance. Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode


Micro-takāful is an Islamic form of micro-insurance designed to provide protection to low-income and underserved communities against risk and misfortune. As opposed to regular takāful products which target participants with financial capabilities, micro-takāful is dedicated to low-income groups that are partly or wholly excluded from formal takāful products due to their financial constraints. Zakāh and waqf are Islamic instruments prescribed for socio-economic development to help and support eligible zakāh recipients and waqf beneficiaries. This paper investigates the nature of micro-takāful as a tool of financial inclusion. It examines how zakāh and waqf can be harnessed in micro-takāful to provide social security and uplift the economic conditions of underserved communities. The Sharīʿah issues related to the use of zakāh and waqf as part of the micro-takāful model are also examined.

Research objectives

This study aims to realise the following objectives:

  • to examine the role of zakāh and waqf in socio-economic development and in what ways both can be streamlined to suit micro-takāful models; and

  • to identify possible Sharīʿah issues related to the operations and contractual obligations in utilising zakāh and waqf in micro-takāful models.

Research methodology

This research is qualitative in nature. It uses the content analysis approach in identifying and interpreting relevant Sharīʿah concepts to be used in developing the zakāh- and waqf-based micro-takāful model. The research uses evidence gathered mainly from secondary sources of data. These include the Qurʾān and Sunnah (Prophet’s teachings) as well as the resolutions of internationally recognised Sharīʿah bodies such as the International Fiqh Academy of the Organisation of Islamic Cooperation (IFA-OIC), the Islamic Fiqh Academy of the World Muslim League (IFA-WML) and the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). Other sources of reference include books, journal articles and conference proceedings on the related topic of discussion.

In developing the theoretical framework and the zakāh- and waqf-based micro-takāful model, a focus group discussion (FGD) was held to seek first-hand expert opinions on micro-takāful models in Malaysia and the possibility of incorporating zakāh and waqf as part of the model. The focus group involved representatives from different stakeholders including the Malaysia Takaful Association (MTA), takāful operators (TOs) and zakāh institutions such as Pusat Pungutan Zakat (PPZ), Lembaga Zakat Selangor (LZS) and Bahagian Zakat (BZ) under Majlis Agama Islam Negeri Johor.

Sharīʿah issues related to the zakāh- and waqf-based micro-takāful model

Sharīʿah issues in the use of zakāh funds

The Sharīʿah issues in the use of zakāh funds are divided into two, namely, issues related to zakāh allocation and issues related to the operation of zakāh-based micro-takāful.

Sharīʿah issues in zakāh allocation in micro-takāful

The utilisation of zakāh in micro-takāful stems from discussions of contemporary scholars on the permissibility of utilising zakāh for investment or using it to establish microfinance funds or guarantee funds (al-Shubaily, 2012). Thus, the allocation of zakāh – whether for investment, Islamic microfinance funds or guarantee funds has been categorised into three groups based on the source of the zakāh:

  1. zakāh allocation by zakāh payers;

  2. zakāh allocation by a zakāh authority; and

  3. zakāh allocation by zakāh recipients.

Classical scholars have two different views on zakāh allocation by zakāh payers. The first view, held by Mālikī, Shāfiʿī and Ḥanbalī scholars as well as the majority of Ḥanafīs, disallows it, as zakāh funds are meant to be used immediately (Ibn Qudāmah, 1983: 2/541; al-Nawawī, 2002, p. 267; Ibn Juzay, 2013, p. 183). The second view, held by some Ḥanafī scholars such as Abū Bakr al-Jaṣṣāṣ, is that zakāh payers have their whole lifetime to meet their obligations of zakāh, and payment of zakāh is not restricted to a specific period. The nature of this extended obligation (wājib muawassaʿ) does not require immediate payment of zakāḥ, as opposed to the first viewpoint (al-Kāsānī, 1986: 2/3). The authors of this paper, however, prefer the first view due to the strong supporting evidence from the Qurʾān and Sunnah, as well as its consistency with the rule regarding the default meaning of the imperative form (الأمر) in the Arabic language.

Regarding zakāh allocation by a zakāh authority, it does not pose serious Sharīʿah issues as in the case of allocation of zakāh funds by zakāh payers because the zakāh obligation is actually being discharged without delay by zakāh payers to the zakāh authority. However, the main concern here lies in whether the allocation helps to cater for the urgent needs of zakāh recipients. If this is not the case, it would defeat the purpose of zakāh altogether. In that regard, the baseline of the arguments and discussions of contemporary scholars is to adopt the view of classical scholars that utilisation of zakāh funds should have immediate effect.

Scholars have two views about zakāh allocation by a zakāh authority. The IFA-MWL in its Resolution No. 6 in its 15th session, the Fatwa Council of Saudi Arabia, al-Zuḥaylī, Alwānī, and Taqi Usmani viewed that it is not allowed (al-Fawzān, 2012; al-Shubaylī, 2012). The second view is based on the decision of the IFA-OIC in its Resolution No. 15 (3/3), the Zakat House in Kuwait in its third symposium on contemporary issues on zakāh and the Sharīʿah Committee of Kuwait Finance House, which allowed zakāh allocation by the management (Zakat House, 2016; al-Fawzān, 2012). The preferred view is the second view that allows zakāh allocation by the management. The reason is that the concerns raised by the opposite view can be easily addressed. First is the zakāh disbursement delay: there should be no cause for delay once zakāh payers have paid their zakāh dues, and the zakāh management is a legal proxy for the zakāh recipients. Second is the denial of the right of zakāh recipients: it is established that zakāh allocation is for the welfare and benefit of the recipients; therefore, the zakāh management is responsible to ensure that the interest of the zakāh recipients is taken care of.

With regard to zakāh allocation by zakāh recipients, classical and contemporary scholars unanimously agree about the permissibility of allocation of zakāh by its recipients for investment or other lawful purposes. This view is substantiated by some narrations, especially from Shafiʿī classical books:

Shāfiʿī and Ahmad in a report allowed giving the poor and destitute zakāh funds for investment. As such, a person who makes handicrafts would be given zakāh funds to purchase a machine to make income that is sufficient to maintain a decent standard of living (al-Nawawī n.d.: 6/193-194).

Sharīʿah issues related to the operation of the zakāh-based micro-takāful model

Sharīʿah issues arise in the distribution of zakāh funds. This triggers the following questions: Is it compulsory to disburse zakāh funds to all zakāh recipients in the micro-takāful plan, or is it allowed to prioritise in accordance with the level of need and urgency? Does the latter alternative violate the concept of tashrīk (inclusiveness) implied in the relevant Qurʿānic texts? There is an incidental question to address before addressing these questions: Is it necessary to have all the categories of zakāh recipients in one place at the same time? The response to this question came from Imām al-Ghazālī when he categorised the zakāh recipients into three major categories. The first category refers to al-muʾallafah (those inclined towards Islam) and al-ʿāmilūn (zakāh collectors). The second category involves al-ghuzāh (those fighting for Allah’s cause) and al-mukātabūn (slaves). The third category includes the remaining zakāh recipients (al-Ghazālī n.d.).

In response to the first question, it is not compulsory to cover all available zakāh recipients during zakāh disbursement for the following reasons:

  • First, Ibn Abbās reported that the Prophet (peace and blessing be upon him) said:

“إن الله افترض عليهم صدقة في أموالهم تؤخذ من أغنيائهم فترد على فقرائهم”

“Allah has prescribed zakāh on their wealth, to be taken from the rich and given to the poor” (al-Asqalānī, 2001: 3/307, ḥadīth no. 1363).

  • Second, the majority of classical scholars favoured giving zakāh recipients what is sufficient for their daily needs. The Mālikīs, Shāfiʿīs, Ḥanbalīs and some other scholars did not specify a particular amount due to variation in needs and values over time. Therefore, the Mālikī school leaves it to the ijtihād (reasoning) of the zakāh management. In the same vein, the Shāfiʿī view that recipients should be given what satisfies their needs, even if the portion reaches the minimum threshold of zakātable items. Meanwhile, the discussion of what suffices for zakāh recipients prompted the Shāfiʿīs to revisit the minimum threshold of eligible items of zakāh (Al-Nawawī, 2002, pp. 318-320; Ibn Rushd, 1995: 2/654; Ibn Qudāmah, 1983: 2/707).

Another question relates to whether the contribution made by the zakāh management is considered the right of zakāh recipients from the zakāh fund. As highlighted earlier, scholars who favour zakāh allocation for investment or microfinance funds unanimously agreed to give such allocated or invested portion for the benefit of zakāh recipients. Therefore, in the case of micro-takāful, the contribution is donated and owned collectively by the micro-takāful participants, who are also among the zakāh recipients. For example, the entitlement from a family micro-takāful account solely belongs to the participants. As such, in the event of the death of any of the participants, the fund under this account is subject to conditional hibah (gift). This is based on the resolutions of the Shariah Advisory Council of Bank Negara Malaysia in its 165th meeting, which state that after the death of the participant, money coming from the tabarruʿ fund or savings and investment funds would be given to the nominee on the basis of conditional hibah. The Sharīʿah committee of the micro-takāful operator may decide that the savings and investment funds be subject to the rules of Islamic law of inheritance (al-mīrāth).

Sharīʿah issues related to the use of waqf funds for micro-takāful

Acceptance of waqf donations by beneficiaries requires further discussion on how to relate it to micro-takāful. The consent of prospective waqf beneficiaries, if the waqf donor specifies the beneficiaries in a waqf, is crucial to conclude the waqf contract. The same goes for a situation where waqf is made as a source for a micro-takāful plan. Before proceeding with the micro-takāful policy agreement between the waqf management and the micro-takāful operator, the waqf management may first need to have the consent and acceptance of the waqf beneficiary. Similarly, in the underwriting policy, micro-takāful participants are required to stipulate a nominee. The question is whether the failure of the nominee to give consent would affect the policy? The reply to this question may be attempted from two perspectives. First, the views of classical scholars in respect to acceptance and possession of specified beneficiaries in a waqf contract may be considered. The majority of scholars allow conclusion of a waqf contract without the acceptance of the beneficiaries; the same goes for the nominee in a micro-takāful. Therefore, the waqf-based micro-takāful plan can be concluded without the acceptance of the nominee. Second, the issue of waqf does not come into the picture. Although the contribution comes from a waqf, it is no longer a waqf. This is because micro-takāful participants are the waqf beneficiaries. Their entitlement to claim from micro-takāful risk funds represents their portion in waqf funds, which they are fully authorised to give to those whom they want, e.g. their nominees or heirs as agreed in the micro-takāful policy and endorsed by the relevant Sharīʿah scholars. Also, the payment of micro-takāful benefits follows the policy agreed between the micro-takāful participants and the micro-takāful operator, which has been duly approved by the relevant Sharīʿah committee, and it is not subject to waqf rules.

Conclusion and recommendations

This study has examined micro-takāful and discussed some pertinent Sharīʿah issues and views of both past and present scholars in respect of utilisation of zakāh and waqf in the micro-takāful model. Zakāh is a legal instrument and waqf is a voluntary instrument to serve the poor and the needy for attaining social welfare. The effective integration of both concepts in micro-takāful to support financial inclusion will certainly have positive impacts on the lives of underprivileged members of the society.

The paper makes the following recommendations:

  • The use of zakāh and waqf funds to complement participants’ contribution in micro-takāful plans.

  • The use of zakāh and waqf funds to finance the contribution of the whole micro-takāful plan.

  • The use of zakāh and waqf to establish mutual assistance funds for micro-takāful schemes.

  • The fund may have an independent legal personality registered under the relevant authorities under the management of people with technical expertise to deliver micro-takāful services to poor and low-income households.

  • There is a need for zakāh and waqf authorities to issue fatwas and work closely with takāful operators to come up with micro-takāful products to serve the needs of the society.


Al-Fawzān, S.M. (2012), Istithmār al-Zakāh fi al-Tanmiyyah al-Iqtiṣādiyyah wa al-Ijtimāʿiyyah, Paper presented at the 33rd Albaraka Symposium for Islamic Economics, Albaraka Banking Group, Bahrain.

Al-Kāsānī, A.B. (1986), Badāʾiʿ al-Ṣanāʾiʿ fi al-Tartīb al-Sharāʾiʿ, Dār al-Kutub al-ʿIlmiyyah, Beirut.

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Al-Shubaylī, Y.A. (2012), Irṣād Amwāl al-Zakāh wa Istithmāruhā fī al-Tanmiyah al-Iqtiṣādiyyah wa al-Ijtimāʿiyyah, paper presented at 33rd Albaraka Symposium for Islamic Economic, Albaraka Banking Group, Bahrain.

Ibn Juzay (2013), Al-Qawānīn al-Fiqhiyyah Fi Talkhīṣ Madhhab al-Mālikiyyah, Dār Ibn Ḥazm, Beirut.

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Further readings

Al-Mubārakfūrī, U.M. (1984), Murāʿāt al-Mafātiḥ Sharḥ Miftāḥ al-Maṣābiḥ, Al Jāmiʿah al-Salafiyyah.

Abū ʿUbayd, Q.S. (2017), Kitāb al-Amwāl, Dār al-Fikr, Beirut.

Accounting and Auditing Organization for Islamic Financial Institutions (2015), Sharīʿah Standards, Accounting and Auditing Organization for Islamic Financial Institutions, Bahrain.

Bank Negara Malaysia (2010), Sharīʿah Resolutions for Islamic Finance, Bank Negara Malaysia (BNM), Kuala Lumpur.

Laldin, M.et al., (2013), Islamic Legal Maxims and Their Application in Islamic Finance, International Shari’ah Research Academy for Islamic Finance, Kuala Lumpur.

Shubayr, M. (1426H), Istithmār Amwāl al-Zakāh, paper presented at the Third Fiqh Symposium on Contemporary Zakāt Issues, available at: http://almoslim.net/node/82957 (accessed 21 March 2016).

Corresponding author

Said Adekunle Mikail is the corresponding author and can be contacted at: saidmikail@isra.my

About the authors

Said Adekunle Mikail, PhD, is a Researcher at the International Shari’ah Research Academy for Islamic Finance (ISRA). He holds a master’s in Comparative Laws and PhD in Law from International Islamic University Malaysia.

Muhammad Ali Jinnah Ahmad is a Researcher at ISRA. He holds a master’s in Islamic Management, Banking and Finance from Loughborough University, UK.

Salami Saheed Adekunle is a PhD Candidate at the International Centre for Education in Islamic Finance (INCEIF), Malaysia.

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