International Journal of Arts and Commerce Vol. 1 o. 7 December 2012 61 Zakat and Poverty Alleviation: Roles of Zakat Institutions in Malaysia Farah Aida Ahmad adzri PhD Candidate RashidahAbdRahman Professor in Corporate Governance and Islamic Finance ormah Omar Professor in Management Accounting and Financial Criminology Accounting Research Institute UniversitiTeknologi MARA (UiTM) 40450 Shah Alam, Selangor, Malaysia. aidanadzri_84@yahoo.com , shidah@salam.uitm.edu.my Tel: +(60)3-5544 4829, Fax: +(60)3-5544 4992 ABSTRACT In Islam, poverty is defined based on an individual failure to fulfil any of the five basic human requirements of life that is based on Maqasid Syariah: i) religion, ii) physical self, iii) knowledge, iv) dignity, and v) wealth. Consistent with the brotherhood concept in Islam, Muslims were strongly encouraged to look after the poor in their community. Thus, in 9AH, the obligation to pay zakat on wealth was received by the Prophet Muhammad (pbuh). History proves that zakat is an effective tool to alleviate poverty as during the period of Umar bin Al Khattab and Umar bin Abdul Aziz poverty is completely eliminated. However, with the fall of Islamic Empire and the increasing European influence during the colonialism period, Zakat Institutions have lost their glory. Therefore, the objective of this paper is to provide a conceptual study on the roles of zakat in alleviating poverty especially in Malaysia by examining both theory and practical aspects. It is also suggested that the effectiveness of Zakat Institutions may improve by collaborating with other institutions such as Microfinance Institutions. Keywords: zakat, poverty alleviation, Zakat Institutions in Malaysia. I. ITRODUCTIO Tawheedis the basis of Islamic faith. Mirza and Baydoun (1999, p. 2) define tawheed as “unity or oneness to God”. It is related to the belief that this universe and its contents are created by God, and human beings as khalifah(vice-regent) are responsible to manage the world’s resources and the ummah(community of believers) properly (Abdul-Rahman& Goddard, 1998; Sulaiman, 2003).Based on this concept, it is obvious that one needs to adhere to the Islamic requirements in every aspect of his or her life including religious, political, social, and economic activities in order to maintain a good relationship with God. In general, muslims believe that they are responsible for their actions and all actions are accountable to God on the Day of Judgment. As God created the universe, God is the ultimate owner of everything and human beings are