The Muamalat Newsletter Vol. 2 2024

FEM eNewsletter | December 2024 43 Introduction The effective utilization of zakat funds to empower entrepreneurs is a vital component of Islamic social finance. The ISHRAF program, a transformative initiative in Malaysia, serves as a blueprint for using zakat as a tool to foster entrepreneurship among underserved communities. By integrating financial assistance with capacity-building, ISHRAF offers insights into how zakat funds can be strategically distributed to maximize their socio-economic impact. This research, conducted by the Faculty of EconomicsandMuamalat(FEM)examinesthe SME Bank i-TEKAD ISHRAF Program to evaluate its innovative approach to leveraging zakat for entrepreneurial empowerment. This study highlights how Islamic social finance principles can be operationalized to create sustainable economic opportunities for underserved communities. Zakat, a fundamental tenet of Islamic finance, is designed to address poverty and socio- economic imbalances by redistributing wealth to the less privileged. In Malaysia, corporate zakat contributions have grown significantly, accounting for 36% of the RM875 million collected in Wilayah Persekutuan in 2022. Despite this increase, traditional zakat distribution often focuses on short-term relief rather than building long-term economic independence for recipients. The ISHRAF program, initiated by SME Bank, demonstrates how zakat funds can go beyond alleviating immediate financial hardships. By integrating financial aid with structured training and entrepreneurial support, the program empowers recipients (asnaf) to achieve financial independence. The initiative aligns with Maqasid Shariah, ensuring that zakat funds contribute to sustainable development and ethical economic practices. This article delves into the ISHRAF program, exploring its approach to zakat distribution and highlighting recommendations for replicating this model to maximize its impact. The ISHRAF Program: A Holistic Approach to Empowerment The ISHRAF program is a multi-phased initiative that combines zakat funding with structured entrepreneurship support to address socio-economic disparities among asnaf. a. Seeding Fund Allocation Participants receive a seeding fund of RM10,000, distributed in phases to ensure effective utilization. This phased approach ties subsequent funding disbursements to the achievement of specific business milestones. This ensures accountability and encourages recipients to optimize the use of funds. b. Training and Capacity Building Participants undergo 28 hours of classroom training facilitated by the Centre for Entrepreneur Development and Research (CEDAR). Trainingmodules include: • Business Model Canvas: Helping participants structure and plan their business strategies. • Digital Marketing: Teaching effective online promotion techniques to expand customer reach. • Financial Management: Enhancing budgeting and cash flow management skills. This comprehensive training equips participants with the knowledge needed to manage and grow their businesses sustainably.