Zakat investment in Malaysia: an analysis of shariah compliance perspective

The management of zakat funds is a significant responsibility that demands both administrative efficiency and strict adherence to Shariah principles, particularly in safeguarding the trust of the Muslim community and fulfilling the rights of the asnaf. In light of economic challenges such as the COVID-19 pandemic, concerns have arisen regarding the sustainability of relying solely on public contributions for zakat collection. As a long-term strategy, the concept of zakat fund investment (istithmar zakat) has been proposed by Islamic scholars as a means of generating continuous benefits for the asnaf. However, the permissibility and feasibility of such investments remain subjects of scholarly debate, especially in relation to Shariah compliance. This study focuses on the Kedah State Zakat Board (LZNK) and aims to explore the potential and practicality of implementing zakat fund investments from a Shariah compliance perspective. The research analyzes LZNK’s current position, policies, and level of preparedness for zakat investment while assessing how such practices could align with core Shariah principles and the economic needs of the asnaf community in Kedah. Findings reveal that, although zakat investment has not yet been implemented by LZNK, there is growing awareness and internal discourse surrounding its potential. Nevertheless, several critical issues must be addressed comprehensively, including the preservation of zakat’s original purpose, risk management, and prioritization of the immediate needs of asnaf. Ultimately, this study proposes several recommendations as mechanisms to enhance and sustain zakat revenue in the future. It also outlines the scholarly disagreements on the permissibility of zakat fund investment and encourages stakeholders to reassess this approach based on sound Shariah governance, transparent policies, and regular monitoring to ensure that such initiatives can support the long-term development of the asnaf community without compromising Shariah principles.