Risk management framework in zakat-based Islamic microfinance

Mahadi, Nur Farhah and Hasan, Aznan and Mohd Noor, Azman and Zakariyah, Habeebullah (2025) Risk management framework in zakat-based Islamic microfinance. Etihad: Journal of Islamic Banking and Finance, 5 (1). pp. 58-75. ISSN 2807-730X E-ISSN 2807-6915

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Abstract

Introduction: This study explores the potential of utilizing zakat funds or their proceeds for microfinance initiatives by developing a robust risk management framework. The framework aims to ensure prudential use of zakat resources and align with Islamic ethical and operational principles to enhance the effectiveness of zakat-based microfinance in promoting socioeconomic empowerment. Research Methods: A qualitative approach is employed to analyze the use of Islamic financial contracts such as qarḍ ḥasan, muḍarabah, musharakah, salam, and ijarah in managing portfolio risks within zakat-based microfinance institutions. Results: The findings indicate that a structured risk management framework improves the financial stability and accountability of zakat-based microfinance institutions. It provides clear parameters for prudential management and helps safeguard zakat funds against potential losses. Conclusion: This study proposes a practical framework that helps zakat institutions balance financial sustainability with their mission of socioeconomic empowerment, enhancing transparency and resilience in zakat-based microfinance.

Item Type:	Article (Journal)
Uncontrolled Keywords:	Risk management framework, zakat-based microfinance, Asnaf
Subjects:	BPH Islamic Economics BPH Islamic Economics > BPH531 Zakat
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button):	Institute of Islamic Banking & Finance (IIiBF)
Depositing User:	Dr Nur Farhah Mahadi
Date Deposited:	27 Oct 2025 08:50
Last Modified:	27 Oct 2025 08:50
URI:	http://irep.iium.edu.my/id/eprint/123849

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