Microfinancing Programme For Asnaf Micro-Entrepreneurs

Alliance Islamic Bank Zakat Microfinancing Programme (“AZAM”) is a first-of-its kind Islamic social microfinancing programme in Malaysia that utilises Zakat Wakalah Distribution funds to help asnaf micro-entrepreneurs. The programme will enable recipients to expand their businesses and improve their livelihoods by providing them access to affordable financing opportunity. The fund will be distributed according to the Qard concept (repayment without profit).

In March 2023, the Selangor Fatwa Committee granted a permission to allow the implementation of the microfinancing programme by Alliance Islamic Bank that is given Wakalah funds by Lembaga Zakat Selangor based on Shariah law.

The underlying Shariah concept used is Qard (interest-free financing), where the asnaf micro-entrepreneurs are only required to pay the equivalent amount borrowed throughout the tenure.

• Applicants must have the status of ‘asnaf’ (asnaf fakir atau miskin’), as determined by the State Islamic Religious Council.
• Applicants must be registered with Lembaga Zakat Selangor.
• Applicants must also be registered with Amanah Ikhtiar Malaysia.
• Applicants must seek funds for their businesses, not for consumption of basic needs such as food, medication or education.

1. Alliance Islamic Bank allocates Zakat Wakalah funds for the microfinancing programme.
2. Funds are channelled to eligible asnaf micro-entrepreneurs in the form of microfinancing using the Shariah concept of Qard. (Qard is a form of financing with no interest and no additional charges).
3. This programme also offers training sessions to equip asnaf micro-entrepreneurs with entrepreneurial skills such as financial and business management, and marketing to improve their business performance.
4. Asnaf micro-entrepreneurs use the funds from microfinancing to start or expand their existing businesses.
5. Asnaf micro-entrepreneurs then make repayments for the financing amount in instalments.
6. Zakat funds paid by the asnaf micro-entrepreneurs can be used and distributed to the subsequent asnaf micro-entrepreneurs who are qualified in the form of microfinancing. Through this method, zakat micro-financing is used repeatedly while providing multiple and continuous benefits to the asnaf micro-entrepreneur community.

The applicant of the Zakat Wakalah Distribution funds (in this case, Alliance Islamic Bank) is responsible for determining and identifying the recipients. The confirmation of the eligibility of the recipients will be done by Lembaga Zakat Selangor.

RM5,000 for first-time eligible asnaf micro-entrepreneur. The Bank may decide to increase the subsequent financing amount, subject to the availability of the Zakat Wakalah distribution fund.

One year from the disbursement date.

The programme uses the concept of Qard, so it is an interest-free financing.

The asnaf micro-entrepreneur will no longer be eligible for a second round of funding.

The zakat fund will be re-distributed to other eligible asnaf micro-entrepreneurs and shall be distributed in the form of consumptive zakat within 3 years of the programme execution.

For this pilot phase, Alliance Islamic Bank is targeting to allocate RM225,000 to help 45 asnaf micro-entrepreneurs.

No, the Bank will not receive any profit or dividend. No interest (0%) or management fees charged in relation to the micro-financing based on the concept of Qard.

Amanah Ikhtiar Malaysia, the strategic partner for this programme is responsible for screening of recipients and providing infrastructure for fund disbursement and collections.

Financial inclusion is key to uplift the livelihoods of the asnaf community. AIS understands the challenges faced by the asnaf micro-entrepreneurs who are in need of funding opportunity. This programme is able to create a financial ecosystem that is more inclusive for the underserved segments that do not receive attention from financial institutions. It will ensure a wider access to financing and capital support to the asnaf community to improve their economic standing and become the next generation of SMEs in the country.