THE CHALLENGES OF ZAKAT DISTRIBUTION IN MODERN ISLAMIC FINANCE: POLICY RECOMMENDATIONS FOR EFFICIENCY

Abstract

Zakat, one of the fundamental pillars of Islam, serves as a mechanism for wealth redistribution and social welfare. Despite its potential to alleviate poverty, the efficiency of zakat distribution in modern Islamic finance remains a significant challenge. This study explores the key obstacles in the effective disbursement of zakat funds, including issues related to governance, lack of standardized regulatory frameworks, mismanagement, and inefficient targeting of beneficiaries. Additionally, the paper examines the role of digital financial technologies, institutional reforms, and policy enhancements in improving zakat distribution mechanisms. The study employs a qualitative approach, analyzing existing models of zakat distribution in various Islamic countries, highlighting best practices, and identifying gaps in implementation. The findings suggest that a transparent and centralized zakat management system, integration of financial technology, and alignment with global social welfare strategies can enhance the impact of zakat on poverty alleviation. Furthermore, recommendations are made to optimize zakat institutions through improved data collection, automated tracking of funds, and enhanced collaboration between state and non-state actors. By addressing these challenges through policy innovations and technological integration, the effectiveness of zakat as a tool for socioeconomic development can be significantly improved. The study concludes that a harmonized zakat framework, supported by robust governance structures, can ensure a more equitable and efficient distribution system, ultimately fulfilling the economic justice envisioned in Islamic finance.