How Southeast Asian countries can utilize Zakat to combat poverty

The Southeast Asian region is home to 697.4 million people, with Muslims constituting over 40% of its population. Despite Zakat being one of the prevalent socio-economic instruments that could help improve the living standards of the underprivileged - multitudes of people across the region continue to live in penurious conditions. 

This perhaps could be one of the reasons why Southeast Asian countries struggle to extricate people from stifling economic conditions. For instance, Indonesia, much like the rest of the world, is also plagued with poverty, despite housing the world’s largest Muslim population. In 2024, the country housed a total of 25.2 million people living in poverty, 5 million of whom are extremely poor. 

Zakat is the third pillar of Islam, mandating eligible Muslims to give at least 2.5% of their qualifying wealth to the needy. Zakat collection across Indonesia has increased steadily over the years, from 14 trillion Indonesian rupiah ($855.8 million) in 2021, to 22.5 trillion Indonesian rupiah ($1.37 billion) in 2022, and 32.3 trillion Indonesian rupiah ($1.97 billion) last year. This year’s Zakat projection stands at 41 trillion Indonesian rupiah ($2.53 billion). Yet, these funds have managed to help only a limited pool of people, with a mere 463,154 benefiting in 2022, and 574,903 in 2023.

“We are looking for as much help, thoughts, theories, ideas and global best practices to maximize the distribution of Zakat to reduce poverty, but at the same time also increase infaq and sadaqah,” Noor Achmad, chairman of Indonesia National Zakat Agency (Baznas) told Salaam Gateway on the sidelines of the 8th International Conference on Zakat (ICONZ) in Bandung.

The agency, according to Noor, has made a national Zakat roadmap 2045, which summarizes the means to maximize collection and distribution of funds for poverty alleviation as well as related challenges. Ideally, Indonesia needs an annual Zakat fund of around 417 trillion Indonesian rupiah ($27 trillion), equivalent to 2% of its GDP.

“The challenge remains of limited funds. With the current collection rate, it's like we're still in the piloting phase,” he said.

A non-governmental organisation Islamic Relief estimated that if just the world's 10 richest people paid Zakat, it would help amass a staggering $9.25 billion. 

Other challenges include limitations on the definition of Zakat beneficiary, especially for riqab (slave) and gharimin (indebted). Some countries like Brunei interpret riqab in literal terms. Malaysia has adjusted its understanding to the current context, hence the country has listed 19 types of riqab, including  drug-afflicted individuals, those that fall into prostitution, are mentally struggling, and are imprisoned, among others. In Indonesia, the agency only assists riqab in the form of repatriating migrant workers sentenced to death.

“We want to pursue Indonesia Ulema Council (MUI) as a regulator to issue regulation on this matter,” Achmad said. Despite the amounts, Zakat collection in Indonesia has never been disrupted by any situation or crisis. 

This is the advantage of Zakat funds because they are related to religious matters, Achmad added. 

Muslim-majority countries 
Other Southeast Asian Muslim-majority countries such Malaysia and Brunei also faced no significant constraints in collecting Zakat funds.

Azhan bin Ismail, chief financial officer at the Malaysia Zakat Collection Center (PPF) told Salaam Gateway that the centre collects Zakat funds from the federal territories of Kuala Lumpur, Putrajaya and Labuan. Collected funds totaled more than 1.2 billion Malaysian ringgits ($266.3 million) annually.

Factoring in other 13 Malaysian states, the total Zakat collected reached three billion Malaysian ringgits ($665.9 million) annually. 

PPF however, isn’t solely focused on improving its collection and distribution methods but also how best to leverage existing funds. For instance, building affordable houses on waqf land. Previously Saudi Arabia, Singapore and the state of Selangor in Malaysia allowed the development of waqf land by way of leasehold for commercial properties. This method uses the waqf’s principle of perpetuity, meaning that there is no transfer of ownership involved. 

“With the new economic paradigm currently in Kuala Lumpur, Zakat fund can be utilized for financial leverage. If we use just one billion Malaysian ringgits of the annual national Zakat fund of around three billion Malaysian ringgits, to purchase properties of people (Bukit Damansari Residence), we can get 500 million Malaysian ringgits in capital gain,” bin Ismail said.   

“Zakat management today isn’t just abiding by legal directives, but the strategic aspect is also important. We can see the same example from IsDB that is brave to channel funds to save Pakistan from bankruptcy. Indonesia has also issued its Zakat roadmap 2045, which is a benchmark we need for Kuala Lumpur, too,” he stated.

Ariffin bin Dato Paduka Haji Abu Bakar, director general of Zakat, Waqaf and Baitulmal Management at Ministry of Religious Affairs, Brunei Darussalam said the country also aims to establish a roadmap to increase national Zakat collection within the next 10 years. In the last three years, Zakat fund collection reached around $13.2 million annually.

Brunei has appointed a dedicated directorate general to manage national Zakat collection. The country, according to Abu Bakar, focuses on plugging Zakat funds into the education and housing sector, especially providing affordable shelters for the poor. It has also begun to focus on empowerment initiatives such as offering training and entrepreneurship opportunities to poverty-stricken individuals. The country’s current poverty rate is recorded at around 5%.

Muslim-minority nations
Zakat collection in Muslim minority countries across Southeast Asia is all the more challenging, including Cambodia, where the prevalent poverty rate is 16.6%; Philippines (poverty rate: 15.5%), Thailand (5.4%), Myanmar (49.7%), Vietnam (3.4%), Laos (18.3%), and Timor Leste (48.9%).

Myanmar discriminates against Muslims and restricts their appointments to key positions across the armed forces, police and/or other strategic departments. Such challenges also exist for Muslims in Thailand - save for the Pattaya region – as well as in Cambodia and the Philippines.

There are around 700,000 Muslim residing in Cambodia, representing a paltry 5% of its 17 million population. 

“There are so many things we can learn from Muslim countries, especially Indonesia as the largest Muslim country in the world. Indonesia can share its experience regarding the Zakat management program and we are determined to learn, so that we can bring its experience to Cambodia,” said Thorn Sarorn, advisor to the Royal Government of Cambodia. 

Thorn, who represented Cambodia at the International Zakat conference, said he would invite representatives from Baznas and PPF for knowledge sharing. 

The Philippines also expressed interest in inviting experts from Indonesia and Malaysia. Officials say no law exists that could help regulate the management or development of properties purchased from Zakat. Given the lack of support from government agencies, Zakat beneficiaries in the Philippines relied on local Muslim organizations to mobilize independent resources to redirect the distribution of wealth. 

“We are trying our best to collect Zakat from individual citizens in the Bangsamoro Autonomous Region in Muslim Mindanao to promote agriculture and fishery industry. We know these farmers need capital to improve their welfare,” said Mohammad Shuaib Yacob, Minister of Agriculture, Fishery and Agrarian Reform of Philippines.