Addressing Challenges, Unleashing Potentials: Towards Achieving Impactful Islamic Social Finance

This study examines the domain of Islamic social finance within the framework of addressing prevalent challenges and harnessing potential for significant socio-economic impact. It lies in the acknowledged ability of Islamic social finance mechanisms - zakat, Islamic crowdfunding, Islamic microfinance and waqf - to address poverty and promote economic equality, yet the full realization of these benefits is impeded by numerous challenges. This study therefore identifies the primary issue as understanding these impediments and determining how to effectively navigate them for enhanced Islamic social finance impact. Its aim is to comprehensively analyze the issues, identify unexploited opportunities, and formulate recommendations for a robust and impactful Islamic social finance system. To this end, the study utilizes a library-based approach, conducting an extensive review of relevant literature, including academic articles, books, policy reports, and case studies. It is revealed that governance and regulatory challenges, socio-economic obstacles, and discrepancies in the application and understanding of Islamic social finance mechanisms are the primary hurdles. Potential solutions range from harmonizing regulatory standards, promoting transparency and accountability, to fostering economic empowerment and cross-border collaboration in the Muslim world. This study implies that addressing these challenges and harnessing Islamic social finance's potential can lead to a more effective poverty alleviation strategy, contributing to wealth redistribution, social justice, and sustainable development in line with Islamic principles. This research, therefore, holds substantial implications for policymakers, regulators, and practitioners within the Islamic social finance ecosystem, and suggests the necessity of collaborative, informed efforts to unlock the transformative power of Islamic social finance.