By Amelia Nur Natasha Nazeri, Habibah Solehah Ramli, Siti Fatimah Mohamed Noor, Amir Shaharuddin
Centre of Excellence for Islamic Social Finance (CoeISF), INCEIF University
The Muslim world is increasingly being pitched blockchain and artificial intelligence as solutions to institutional inefficiency and declining public trust. In particular blockchain is often praised for the potential transparency, automation, and traceability it offers for zakat administration. But a maqasidi approach asks a more basic question: does technological efficiency necessarily translate into maslahah? Islamic thought has never judged tools only on their functionality, but on their moral and social consequences. The challenge, then, is not whether blockchain can improve zakat systems, but whether it can do so in a manner that respects justice, dignity, and the higher purposes of Shariah.
Zakat is more than an economic requirement. It is a device divinely ordained for the redistribution of wealth, the reduction of inequality and the strengthening of social solidarity. Unlike secular taxation systems which are largely based on legal and fiscal structures, zakat has a spiritual and ethical dimension based on compassion, accountability and collective welfare. Its effectiveness cannot, therefore, be measured only in terms of collection figures or administrative efficiency. What is important for success is if zakat institutions are genuinely helping to remove suffering, empowering vulnerable communities, and achieving the maqasid al-shariah.
But today, zakat institutions are facing an increasing trust crisis. Questions of transparency, late distributions, bureaucratic delays and governance failures remain central to the minds of many in Muslim societies. Digitalization has enhanced the convenience of payment via online portals, mobile applications, and e-wallet integrations but these developments have not sufficiently addressed underlying issues of accountability and fair distribution. Many systems remain centralized, opaque, and based on institutional assurances rather than trust mechanisms that can be verified.
This is where the blockchain technology comes into play. Blockchain is often defined as a decentralized digital ledger that records transactions in a secure, immutable, and transparent manner. When the information is entered, it is difficult to change or manipulate. In a distributed network, transactions are traceable and verifiable without the need to fully rely on centralized intermediaries. Blockchain has already disrupted the discussion in traditional finance around digital assets, payments, and governance systems. It is increasingly being proposed in the Islamic finance industry as a tool for increasing transparency in areas such as halal supply chains, waqf administration, and zakat management.
On the surface, blockchain seems to be very compatible with the ethical aims of zakat. Transparency can build trust between zakat institutions and the public. Traceability enables donors to follow the distribution of the money. Smart contracts automate disbursement and reduce administrative delays. Immutable records reduce opportunities for corruption, leakages or mismanagement. These features seem to be consistent with maqasidi principles, namely protecting zakat funds from being misused and at the same time improving accountability in financial governance, which supports hifz al-mal (protection of wealth).
But maqasidi thought requires us to move beyond superficial assumptions that technological innovation automatically yields benefit. Maslahah is not simply about efficiency. A system can be technologically advanced and at the same time subvert justice, dignity or inclusiveness. This distinction matters because in contemporary societies, modernization is often equated with moral progress, with digitization presumed to be necessarily beneficial for human welfare. However, the Islamic intellectual tradition has a more nuanced perspective on innovation. Technologies are not inherently Islamic, ethical or maqasidi. Their worth is determined by how they structure human relations, social formations, and the pursuit of justice.
There is no doubt that blockchain has great opportunities for zakat governance. Restoring institutional trust is one of its greatest contributions. Public confidence is vital, as zakat is not merely a financial mechanism, but an act of worship. When Muslims begin to question whether the zakat institutions are distributing the funds fairly and efficiently, it undermines the spiritual integrity of the institution itself. The transparency mechanisms of blockchain can therefore at the same time increase administrative accountability and religious confidence.
In addition, blockchain can enhance the speed and effectiveness of zakat distribution. In many cases, vulnerable beneficiaries are delayed in receiving assistance due to administrative bottlenecks and verification processes. Smart contracts can be used in automated systems to speed up disbursement when specific conditions are met. This is consistent with hifz al-nafs (protection of life), especially when zakat is used as emergency aid for food insecurity, health care, or disaster relief. Blockchain can even be used for long-term socio-economic planning. Reliable and transparent data could help policymakers identify trends in poverty, monitor the effectiveness of distribution, and evaluate the broader impact of zakat programs. If implemented ethically, such systems could turn zakat into a strategic instrument for socioeconomic empowerment as opposed to a reactive charitable mechanism.
But the maqasidi evaluation cannot be limited to potential benefits only. Digital exclusion is one of the most pressing issues. The blockchain systems demand technological infrastructure, Internet access and digital literacy. Many vulnerable communities, especially in rural or economically marginalised areas, may lack the capacity to engage effectively with digital platforms. The paradox is that a system designed to be more inclusive can actually be more exclusive to those who need the most help. The maslahah claimed is highly questionable if the adoption of technology increases the inequality between digitally connected populations and marginalised groups.
There is also the risk of reducing zakat governance to a technical administration. Blockchain can automate processes, but it cannot replace ethical judgement, empathy or contextual understanding. Who deserves help the most? How to triage extreme situations? How to respond to human suffering? These are all moral questions. They can not be fully captured in algorithms. Over-reliance on automation may turn zakat into a mechanical transaction, stripping it of spiritual and social meaning.
More importantly, the rising interest in technological solutions carries the risk of the emergence of what could be called ‘technocratic reductionism’ in Islamic governance. Institutions can become too focused on efficiency metrics and miss the deeper structural injustices that perpetuate poverty and inequality. Blockchain cannot solve weak governance culture, political dysfunction or ethical failures on its own. Technology can support institutions, but it cannot replace moral leadership.
This is exactly where maqasidi thought provides a much needed correction. The maqasidi reasoning does not ask whether blockchain is permissible in a narrow legalistic sense, but whether it truly serves justice, welfare and human flourishing. It moves the conversation from technical feasibility to civilisational purpose.
Therefore, a truly maqasidi approach to technology must be guided by a number of principles.
Technology and innovation must be human-centered rather than system-centered. The end of zakat is not administrative perfection, but human welfare and dignity. Then, accessibility and inclusiveness should be in the forefront. Technologies that increase efficiency of operations but also increase inequality or marginalise vulnerable groups are against the spirit of zakat.
Third, transparency must be ethically balanced against confidentiality. Protecting the dignity of beneficiaries is itself a maqasid. Fourth, technological governance must be accountable to people. Automation should augment ethical decision-making, not supplant it. Finally, innovation in Islamic institutions must be goal-oriented. The aim is not to look hi-tech but to build justice, trust, and social solidarity that really works for society.
Blockchain may well be an important tool in the future of zakat governance. It has real potential for reform, by increasing transparency, accountability and efficiency. But from a maqasidi perspective, technology should never be an end in itself. The real measure of success for blockchain is not how complicated the system looks, but whether it can support the ethical and social goals that zakat was revealed to bring about. What will determine the future of Islamic governance is not necessarily the adoption of new technologies, but rather the assurance that such technologies are tethered to Revelation, directed by ethics, and committed to human flourishing.