THE THE IMPACT OF ISLAMIC SOCIAL FINANCE ON POVERTY ALLEVIATION AND WELFARE

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Abstract

This study examines the impact of Islamic Social Finance (ISF) on poverty alleviation, welfare improvement, and financial inclusion using a systematic literature review approach. ISF instruments, including zakat, waqf, and Islamic philanthropy, are increasingly recognized as strategic tools for addressing socio-economic inequality. This study synthesizes empirical findings from recent literature to evaluate the effectiveness of ISF in achieving inclusive economic development. The results indicate that zakat significantly contributes to income redistribution and poverty reduction, while productive waqf supports long-term welfare through asset-based development. Furthermore, ISF enhances financial inclusion by providing access to financial services for underserved populations. However, challenges remain in governance, institutional capacity, and integration with formal financial systems. From the maqāṣid al-sharīʿah perspective, ISF contributes to achieving ḥifẓ al-māl through equitable wealth distribution and sustainable economic welfare. The study proposes an integrative framework linking redistribution, empowerment, and inclusion pathways to strengthen the role of ISF in poverty alleviation.