Singapore Islamic Finance Forum Report 2025 : Zakat Masterclass

Executive Summary

Zakat at Scale: Strong Mandate, Uneven Outcomes

Zakat remains one of the most established compulsory social finance instruments within the Muslim community, yet its real-world outcomes continue to lag behind its theoretical potential. Despite steady growth in zakat collection and record-high figures reported by community institutions, persistent challenges remain in translating collections into sustained impact. The roundtable acknowledged that the issue is not the absence of funds or willingness to give, but systemic weaknesses in governance, literacy, and coordination across institutions involved in zakat, waqf, estate planning, and community finance. This disconnect has created uneven outcomes across beneficiaries and contributed to ongoing questions around effectiveness and trust

Zakat Masterclass

Shariah Governance in the Management of Community Funds

Zakat is one of the most established compulsory mechanisms of wealth redistribution in Islam, with the potential to mobilise substantial financial resources annually. Various studies estimate global zakat potential to reach hundreds of billions to nearly USD 1 trillion per year, an amount theoretically sufficient to address extreme poverty if efficiently collected and distributed. Yet, in practice, actual zakat collections and disbursements remain a small fraction of this potential.

Across many jurisdictions, zakat institutions face recurring challenges: fragmented governance structures, inconsistent calculation methodologies, uneven beneficiary definitions, and growing trust deficits among payers. These gaps result not in the absence of zakat funds, but in delayed impact, idle balances, and limited scalability. The disconnect between obligation and outcome highlights that zakat’s constraint is not religious legitimacy, but institutional execution.

Against this backdrop, led by Dr Ziyaad Mahomed, Associate Professor at INCEIF University, the Zakat Masterclass was convened to examine governance, operational discipline, and policy alignment in zakat management. Rather than revisiting theological foundations, the masterclass focused on how zakat can be managed as a credible, transparent, and impactful social finance system in contemporary settings

“The challenge is that when we receive zakat in an organised society like Singapore, then it may be a challenge to disburse the zakat quickly and efficiently. We have to realise what to do with this, how long can we hold this for? Where do we place it? What is allowed? What is not allowed?” – Dr Ziyaad

Why Does Zakat Have Enormous Potential but Minimal Real-World Impact?

If zakat is divinely mandated and universally recognised, why does its impact remain marginal?
The masterclass highlighted a stark mismatch between theoretical zakat potential and actual outcomes. Estimates place global zakat potential at approximately USD 1 trillion annually, yet actual zakat mobilisation is closer to USD10 billion. At this scale, sustained mobilisation over a decade could theoretically eradicate extreme poverty, but reality falls far short.

The session framed this gap not as a religious failure, but a governance and execution failure. The dominant issue identified was a trust deficit; donors hesitate when governance structures are weak, reporting is opaque, and outcomes are unclear. Without institutional credibility, zakat compliance becomes symbolic rather than transformational.

Can Zakat Institutions Operate Effectively Without Clear Governance Structures?

The masterclass posed a fundamental question: can zakat be managed responsibly without formal governance? The answer was unequivocal: no organisation should handle zakat without a governance policy. Zakat funds are an amanah and restricted fund, not organisational revenue, and must be governed accordingly.

Key governance requirements discussed included:

Segregated zakat accounts
Clear internal controls
Independent Shariah oversight
Transparent reporting

The session also clarified institutional roles. Secular or non-zakat bodies collecting zakat must act strictly as Wakil, not amil, and therefore cannot freely utilise zakat funds. In Malaysia, even formal amil entitlement is capped at 12.5%, underscoring how tightly governance is meant to constrain administrative discretion. Weak governance was identified as a primary source of reputational risk and donor disengagement.

In addition, Institutions managing zakat should maintain ring-fenced bank accounts dedicated solely to zakat collections. Zakat funds should never be commingled with general donations, fees, or other charitable contributions. This separation protects beneficiary rights and allows auditors and regulators to verify that zakat funds are used exclusively for eligible purposes.

Accounting systems must also maintain separate fund ledgers for zakat, enabling clear reporting of collections, distributions, and remaining balances. Annual financial statements should disclose the movement of zakat funds during the reporting period, including opening balances, collections received, disbursements made to asnaf beneficiaries, and closing balances.

These measures strengthen transparency and reinforce the principle that zakat funds belong to the eligible asnaf.

Are Zakat Calculations and Beneficiary Definitions Truly Standardised?

Another core question raised was whether zakat calculations are as consistent as commonly assumed. The masterclass showed that definitions of faqir and miskin vary significantly across jurisdictions, often driven by local income benchmarks rather than universal standards. For example, Indonesia applies monthly income thresholds to distinguish between faqir and miskin, while other countries rely on different metrics.

Similarly, zakat calculation practices differ widely:

Gold vs silver nisab thresholds
Contextual use of Hanafi opinions in high-income countries
Treatment of modern assets and growth-oriented holdings

The masterclass did not reject these differences but stressed that variation must be principled, documented, and transparent. Inconsistent or undocumented practices undermine fairness and trust, especially when donors cannot verify how decisions are made.

What Happens When Zakat Funds Are Collected but Not Immediately Distributed?

A critical operational question addressed was the handling of unutilised zakat funds. The masterclass made clear that idle zakat funds are not neutral, they represent delayed benefit to rightful asnaf. Any temporary placement of zakat funds must prioritise principal preservation, immediate accessibility, and Shariah compliance.

Examples of acceptable short-term placements discussed during the masterclass include:

Islamic current accounts structured under qard.
Short-term commodity murabahah or tawarruq deposits
Wakalah-based cash placements with Islamic financial institutions

These placements should generally remain short-tenor instruments, often within three months, to ensure funds remain accessible for timely beneficiary disbursement. Any returns generated from these placements should be credited fully to the zakat fund.

The objective of zakat fund management is not return maximisation but timely disbursement. Instruments used must align with short-term liquidity needs, and funds cannot be treated as capital for growth or investment. Delays in distribution were framed as a governance weakness, regardless of whether funds remain technically “safe”.

Monitoring Zakat Impact

Participants highlighted the importance of measuring zakat outcomes beyond the amount collected or distributed. Effective zakat systems should evaluate whether assistance leads to meaningful improvements in the lives of beneficiaries.

Examples of simple performance indicators discussed include:

Debt reduction among assisted households, particularly essential expenses such as rent or utilities.
Income improvement among productive zakat recipients, such as beneficiaries supported through entrepreneurship programmes.
Graduation rates and Education continuity, tracking the scholarship beneficiaries.

These indicators shift the focus from short-term charity distribution toward long-term empowerment and poverty reduction, aligning zakat management with broader social development objectives.

Dr Ziyaad Mahomed Profile

Dr Ziyaad is Associate Professor, Lead Researcher (Shariah) for the Centre of Excellence in Social Finance, and Head of Online Programs at INCEIF University.He has advised financial institutions and regulators in Islamic finance, regulation, social finance, fintech and sustainability for almost 25 years. His work spans over 20 countries, with more than 12,000 participants attending his training programs on various aspects of Islamic finance.

Dr Ziyaad has led numerous consulting projects on policy and strategy for large financial institutions and governmental organisations including the UK, Malaysia, Kazakhstan and Pakistan in Islamic banking and takaful, sustainability, sukuk, fintech and social finance advancement.

He is also a consultant to the World Bank for sustainable development of Islamic finance in South-East Asia and Adjunct Professor at the Asia School of Business in collaboration with MIT in the US.

He served as lead consultant on several sustainability projects for financial institutions in Malaysia, providing social impact and ESG assessments and strategies for value-based intermediation, fintech and social finance.

Currently, he serves as Chairman and/or member of several Shariah boards internationally, including HSBC Amanah and Munich Re in Malaysia, Tajbank, FBN Quest and One17 Capital in Nigeria, Ayady Takaful and BML Islamic in the Maldives and iConsult Africa in South Africa, EduPro in the UK and IMAN in Uzbekistan amongst several others.

He holds a Masters and PhD in Islamic Finance from Malaysia, an MBA from South Africa, a BA (Hons) in Business (Finance) from the UK, and certification in the Islamic sciences from South Africa and Jordan.