Humanities & Social Sciences Reviews eISSN: 2395-6518, Vol 7, No 4, 2019, pp 542-548 https://doi.org/10.18510/hssr.2019.7473 542 |www.hssr.in © Adnan et al. THE POTENTIAL FOR IMPLEMENTING MICROFINANCING FROM THE ZAKAT FUND IN MALAYSIA Nurul Ilyana Muhd Adnan 1* , Mohd Izhar Ariff Mohd Kashim 2 , Zahri Hamat 3 , Hafizuddin Muhd Adnan 4 , Nurul Izwah Muhd Adnan 5 , Fariza Md. Sham 6 1,2 Centre for Contemporary Fiqh and Sharia Compliance, Faculty of Islamic Studies, Universiti Kebangsaan Malaysia, Malaysia, 3 Department of Economy and Management, University College Bestari, Putera Jaya, Malaysia, 4,5 Department of Computer Sciences, Kulliyyah of Information & Communication Technology, International Islamic University Malaysia, Kuala Lumpur, Malaysia, 6 Centre for Human and Community Well-being, Faculty of Islamic Studies, Universiti Kebangsaan Malaysia, Selangor, Malaysia. Email: ilyana_adnan@ukm.edu.my Article History: Received on 15 th July 2019, Revised on 30 th August 2019, Published on 24 th September 2019 Abstract Issue: The constrains to obtain a capital often involving underprivileged entrepreneurs because it is difficult to get a fund from the financial institutions. From a Muslim entrepreneur's perspective, microfinance that offered is consisting element of riba and it is prohibited in Islam. As we know, the role of zakat is huge in the economy of the Muslims. So, effective zakat distribution system is able to organize and develop society. Especially for Muslim underprivileged entrepreneurs. Purpose of study: This article aims to analyze first, what is the basis for the establishment of zakat distribution law over the provision of capital through microfinance? Second, is this distribution potentially to be implemented in Malaysia? Methodology: Qualitative data were obtained from document analysis and interview with zakat expertise in Malaysia. Main findings: Based on the content analysis on primary data, the findings show that there is a strong legal basis allowing zakat distribution through micro-financing. According to scholars' views in Malaysia, the distribution of zakat through microfinance has the potential to be implemented in Malaysia. Implications: The distribution of zakat is not limited to self- sufficiency even can be distributed through productive zakat with the provision of initial capital and revolving capital from zakat funds through microfinance. The provision of working capital through microfinance from zakat funds is a long-term goal of zakat. Novelty/originality: Yet, there is no zakat distribution is done through microfinance in Malaysia. Therefore, the institutions of zakat in Malaysia adopt the Baitul Mal Aceh as a model to apply the granting of working capital in the form of micro-financing which is financed from the funds of zakat. Furthermore, scholars in Malaysia also argued that the distribution of such method has great potential to be implemented in Malaysia. Keywords: zakat funds, microfinance, law, practice, potential. INTRODUCTION The issue of poverty received serious attention from Prophet Muhammad SAW when His Majesty SAW explained to RA's companions that zakat should be distributed to help the poor. Imam Abu Hanifa RA has responded to this call by declaring zakat only distributed to the welfare of the poor (Yusuf al-Qaradawi, 2002, Kashim et al. 2015 ). It is also noted by Sayyidina Umar al-Khattab RA when he once instructed his zakat officer saying, which means: "When distributing zakat to poor people, give to the excess in order to be satisfied, repeat gave it to them even if they get a hundred camels" (Abu Ubayd, 2007: 502 ). The problem of poverty is seen very critical because it could undermine the faith of Muslims. So, no wonder if these things are so concerned by the Prophet Muhammad in order to protect the religion of his people. Islam has provided some financial resources to help Muslims.One of financial resources is obligatory.To help preserve the economic development of Muslims, the distribution of zakat to be capable of earning a financial instrument that is effective. Among the financial instruments that are free from riba is the provision of business capital through micro-financing funds of zakat (Adnan 2017 ). Based on the content analysis of the primary data, this article will discuss two parts. First, the basic form of the law of zakat distribution through micro-financing. Second, the potential of the implementation of zakat distribution in the form of micro-financing. DISCUSSION / ANALYSIS THE LAW OF MICRO-FINANCING FROM THE FUNDS OF ZAKAT The proposition of the Qur'an not explain in detail the method of distribution of zakat. In fact, the distribution of the funds of the zakah to one group only does not conflict with the word of God ALMIGHTY in surah Al-Taubah verse 60. The specialization of the eight eligible recipients of zakat is not meant that the zakat funds should be divided equally even amil or the government should distribute them based on the benefits and welfare of the eight asnaf (Sayyid Sabiq, 2009; Kashim