08 December 2023
Alliance Islamic Bank Launches Malaysia’s First Zakat Microfinancing Programme
Press Release
Kuala Lumpur, 8 December 2023 - Alliance Islamic Bank Berhad (“Alliance Islamic Bank” or the “Bank”) today launched the Alliance Islamic Bank Zakat Microfinancing Programme (“AZAM”), Malaysia’s first Islamic social funding programme that utilises zakat wakalah to uplift asnaf (underprivileged) micro-entrepreneurs in the country. The programme promotes financial inclusion and equitable development through the provision of accessible and affordable financing opportunities.
According to the Securities Commission Malaysia (SC), micro, small and medium enterprises (MSMEs) are a key driver of the Malaysian economy, contributing over a third of Malaysia’s national Gross Domestic Product (GDP). The availability of suitable financing options available to them remains sparse with an estimated financing gap of RM90 billion for MSMEs alone. In 2022, close to RM4 billion in total zakat was collected by various zakat institutions and when strategically harnessed, is able to bridge this financing gap for underserved business owners in the B40 segment.
AZAM is introduced as an innovative approach to zakat whereby it is productively distributed via microfinancing through a revolving fund structure, setting a precedent in how zakat is harnessed to help asnaf micro-entrepreneurs. The programme targets eligible asnaf micro-entrepreneurs and is disbursed in accordance with the Qard concept (repayment without interest or profit). Repayments are then channelled into the pool, simultaneously expanding the programme’s impact by supporting more qualified asnaf entrepreneurs and ensuring the sustainability of zakat funds. Aligned with the principles and goals of Value-Based Intermediation (VBI), AZAM intends to create a greater socio-economic impact and achieve the intended outcomes of Shariah by ensuring the distribution of wealth in a just and effective manner.
“Zakat is an essential economic instrument that helps bridge the wealth gap within the community through financial inclusion. We pioneered AZAM with the endorsement and guidance of expert parties to productively distribute zakat to asnaf micro-entrepreneurs while helping them to develop a sustainable source of income and escape poverty,” said En. Rizal IL-Ehzan bin Fadil Azim, Chief Executive Officer of Alliance Islamic Bank.
Alliance Islamic Bank also signed a Memorandum of Understanding with Amanah Ikhtiar Malaysia (“AIM”) as the strategic microfinancing partner in a ceremony witnessed by Lembaga Zakat Selangor (“LZS”). AIM, the largest microfinance institution in Malaysia is responsible for overseeing several aspects of AZAM including screening of beneficiaries and providing the infrastructure for fund disbursement and collections while LZS verifies asnaf beneficiaries.
“This collaboration between Alliance Islamic Bank and AIM enables an innovative social funding model that is Shariah-compliant and has the ability to reach and assist asnaf communities achieve a stable livelihood; transforming them into future zakat payers. We hope that this Programme encourages more private-public collaborations that can uplift the livelihood of the asnaf communities and contribute to the overall welfare of society,” said En. Mohd Sabirin Mohd Sarbini, Chief Executive Officer of Lembaga Zakat Selangor.
The programme pilots the groundbreaking concept first introduced via the Bank’s “Zakat and Microfinance” book published in September 2022. Input from various subject matter experts, organisations and committees were consolidated, deliberated and captured in the book. This research formed the basis of Alliance Islamic Bank’s proposal to the Selangor Fatwa Council to develop this Islamic social funding model. The subsequent approval that was granted by the Fatwa Council, paved the way for the launch of the AZAM programme.
Alliance Islamic Bank will bear all management costs associated with the programme and is allocating a total of RM225,000 zakat wakalah through a revolving fund to benefit an initial 45 asnaf micro-entrepreneurs. Eligible asnaf micro-entrepreneurs who require working capital or capital expenditure support can access up to RM5,000 in zakat microfinancing funds.
To further assist the asnaf micro-entrepreneurs, the AZAM programme includes upskilling modules on areas such as business and financial management and marketing. “Our collaboration enables us to assist low-income micro-entrepreneurs enhance their business skills through training and monitoring sessions,” said En. Mohamed Shamir Abdul Aziz, Managing Director of AIM.
AZAM programme complements Alliance Islamic Bank’s ongoing efforts to empower communities through education, upskilling, funding and the promotion of financial literacy. Alliance Islamic Bank aims to positively impact communities by advancing socio-economic development through its business support activities, notably the Economic Empowerment Programme which more than doubled the income of 50 B40 micro-entrepreneurs. SocioBiz, a Shariah-compliant social funding platform that was launched in 2019 has managed to raise close to RM1.7 million for 1,700 asnaf entrepreneurs and recipients.
For more information about Alliance Islamic Bank’s Zakat Microfinancing Programme, please visit https://www.alliancebank.com.my/Islamic/zakat-microfinancing
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According to the Securities Commission Malaysia (SC), micro, small and medium enterprises (MSMEs) are a key driver of the Malaysian economy, contributing over a third of Malaysia’s national Gross Domestic Product (GDP). The availability of suitable financing options available to them remains sparse with an estimated financing gap of RM90 billion for MSMEs alone. In 2022, close to RM4 billion in total zakat was collected by various zakat institutions and when strategically harnessed, is able to bridge this financing gap for underserved business owners in the B40 segment.
AZAM is introduced as an innovative approach to zakat whereby it is productively distributed via microfinancing through a revolving fund structure, setting a precedent in how zakat is harnessed to help asnaf micro-entrepreneurs. The programme targets eligible asnaf micro-entrepreneurs and is disbursed in accordance with the Qard concept (repayment without interest or profit). Repayments are then channelled into the pool, simultaneously expanding the programme’s impact by supporting more qualified asnaf entrepreneurs and ensuring the sustainability of zakat funds. Aligned with the principles and goals of Value-Based Intermediation (VBI), AZAM intends to create a greater socio-economic impact and achieve the intended outcomes of Shariah by ensuring the distribution of wealth in a just and effective manner.
“Zakat is an essential economic instrument that helps bridge the wealth gap within the community through financial inclusion. We pioneered AZAM with the endorsement and guidance of expert parties to productively distribute zakat to asnaf micro-entrepreneurs while helping them to develop a sustainable source of income and escape poverty,” said En. Rizal IL-Ehzan bin Fadil Azim, Chief Executive Officer of Alliance Islamic Bank.
Alliance Islamic Bank also signed a Memorandum of Understanding with Amanah Ikhtiar Malaysia (“AIM”) as the strategic microfinancing partner in a ceremony witnessed by Lembaga Zakat Selangor (“LZS”). AIM, the largest microfinance institution in Malaysia is responsible for overseeing several aspects of AZAM including screening of beneficiaries and providing the infrastructure for fund disbursement and collections while LZS verifies asnaf beneficiaries.
“This collaboration between Alliance Islamic Bank and AIM enables an innovative social funding model that is Shariah-compliant and has the ability to reach and assist asnaf communities achieve a stable livelihood; transforming them into future zakat payers. We hope that this Programme encourages more private-public collaborations that can uplift the livelihood of the asnaf communities and contribute to the overall welfare of society,” said En. Mohd Sabirin Mohd Sarbini, Chief Executive Officer of Lembaga Zakat Selangor.
The programme pilots the groundbreaking concept first introduced via the Bank’s “Zakat and Microfinance” book published in September 2022. Input from various subject matter experts, organisations and committees were consolidated, deliberated and captured in the book. This research formed the basis of Alliance Islamic Bank’s proposal to the Selangor Fatwa Council to develop this Islamic social funding model. The subsequent approval that was granted by the Fatwa Council, paved the way for the launch of the AZAM programme.
Alliance Islamic Bank will bear all management costs associated with the programme and is allocating a total of RM225,000 zakat wakalah through a revolving fund to benefit an initial 45 asnaf micro-entrepreneurs. Eligible asnaf micro-entrepreneurs who require working capital or capital expenditure support can access up to RM5,000 in zakat microfinancing funds.
To further assist the asnaf micro-entrepreneurs, the AZAM programme includes upskilling modules on areas such as business and financial management and marketing. “Our collaboration enables us to assist low-income micro-entrepreneurs enhance their business skills through training and monitoring sessions,” said En. Mohamed Shamir Abdul Aziz, Managing Director of AIM.
AZAM programme complements Alliance Islamic Bank’s ongoing efforts to empower communities through education, upskilling, funding and the promotion of financial literacy. Alliance Islamic Bank aims to positively impact communities by advancing socio-economic development through its business support activities, notably the Economic Empowerment Programme which more than doubled the income of 50 B40 micro-entrepreneurs. SocioBiz, a Shariah-compliant social funding platform that was launched in 2019 has managed to raise close to RM1.7 million for 1,700 asnaf entrepreneurs and recipients.
For more information about Alliance Islamic Bank’s Zakat Microfinancing Programme, please visit https://www.alliancebank.com.my/Islamic/zakat-microfinancing
Alliance Islamic Bank inked a strategic collaboration with Amanah Ikhtiar Malaysia to oversee several aspects of AZAM. The Memorandum of Understanding was signed by Alliance Islamic Bank Chief Executive Officer En. Rizal IL-Ehzan bin Fadil Azim (second from left) and Amanah Ikhtiar Malaysia Chief Executive Officer En. Mohamed Shamir Abdul Aziz (second from right), witnessed by Lembaga Zakat Selangor Chairman Y.A.M. Tan Sri Dato’ Seri Syed Anwar Jamalullail (third from right) and Chief Executive Officer En. Mohd Sabirin Mohd Sarbini (right), Alliance Islamic Bank Chairman Datuk Wan Azhar Bin Wan Ahmad (left) as well as Amanah Ikhtiar Malaysia Chairman Datuk Seri (Dr) Syed Hussian bin Syed Junid (third from left)