The role of zakat distribution on the sustainability ofgharimin(genuine debtors) in Islamic financial institutions in Malaysia

Abstract

PurposeThis study aims to explore the COVID-19 impact on the sustainability ofgharimin(genuine debtors) in Islamic financial institutions (IFI) in Malaysia. The analysis was further conducted to expand the interpretation ofghariminin zakat institutions (ZI) to use the role of zakat distribution during the post-pandemic period due to income shock and long-term unemployment.Design/methodology/approachThis study adopted a qualitative research approach with grounded theory analysis to integrate theoretical insights into the interpretation ofghariminand current practices from the perspectives of ZI and IFI. An in-depth interview with 18 informants was conducted, and data were collected from senior management positions in the zakat distribution department, academicians who are experts in the area of zakat, and heads of Shariah departments in IFI.FindingsExpanding the interpretation ofgharimincould help ZI and IFI recover the sustainability ofghariminfor preparedness during post-pandemic and any emergency crisis in the future.Practical implicationsThis study implies the potential role of ZI in combating the risk of defaulting debtors in IFI to prepare for pandemic recovery in the future.Social implicationsThe new interpretation assistsghariminin reducing the burden debt using the zakat fund and protects genuine debtors by preventing IFI from declaring default or bankruptcy.Originality/valueThis study narrows the literature gaps aboutghariminin IFI in the context of the pandemic. To the best of the authors’ knowledge, this is, perhaps, the first paper to present the expansion of interpretation forgharimininto mu’sir in IFI in Malaysia.