Standardising Wakalah Zakat Financial Reporting in Malaysia: a Framework for SDG-Aligned Islamic Governance Under the Islamic Accounting Standards for Baitulmal, Zakat, and Waqf (PPIBZW)

Abstract

Objective: The implementation of the Islamic Accounting Standards for Baitulmal, Zakat, and Waqf (PPIBZW) in 2025 marks a major step toward financial harmonization in Malaysia. This study critically examines the inconsistencies in wakalah zakat financial reporting among Malaysian zakat institutions through a systematic literature review and content analysis, particularly in relation to recognition, measurement, disclosure, and governance practices under the framework. The study aims to develop a harmonised reporting framework that enhances transparency, accountability, governance effectiveness, and alignment with the Sustainable Development Goals (SDGs) within Islamic social finance institutions.   Theoretical Framework: This study is underpinned by Institutional theory and Stewardship theory, which collectively explain regulatory standardization pressures and fiduciary accountability in managing zakat funds. These theories provide a foundation for understanding governance reform and alignment with Sustainable Development Goals (SDGs), particularly SDG 16.   Method: This study adopts a qualitative conceptual paper approach supported by a systematic literature review (SLR) and content analysis to examine wakalah zakat financial reporting practices and governance issues under the PPIBZW framework. Relevant academic literature, regulatory standards, policy documents, annual reports, and institutional guidelines related to Islamic accounting, zakat governance, sustainability, and financial reporting standardization were systematically identified and analyzed using recognized academic databases, including Scopus, Web of Science, Google Scholar, and Emerald Insight. The content analysis focused on key themes involving recognition practices, liability measurement, disclosure quality, governance controls, accountability mechanisms, and SDG-related reporting and impact measurement. Comparative analysis of regulatory and institutional documents was subsequently conducted to identify reporting inconsistencies, governance gaps, and standardization challenges, leading to the development of a proposed harmonized wakalah zakat financial reporting framework aligned with SDG-oriented Islamic governance objectives.   Results and Discussion: The findings reveal significant variations in recognition timing, measurement, liability classification, and disclosure practices of wakalah zakat. These inconsistencies lead to reduced comparability, governance weaknesses, and compromised financial statement integrity. The discussion highlights how these issues reflect institutional fragmentation and the need for standardized reporting aligned with regulatory reforms, SDG accountability, and sustainability objectives   Research Implications: This study provides practical and theoretical insights for regulators, policymakers, and zakat institutions by proposing a harmonized wakalah zakat reporting framework. The findings support improved governance, enhanced transparency, and more effective zakat distribution, thereby contributing to SDG achievement through sustainable Islamic social finance practices.   Originality/Value: This research contributes to the literature by addressing a critical gap in wakalah zakat accounting standardization and integrating governance, Islamic accounting, sustainability, and SDG reporting perspectives. Its value lies in offering a policy-relevant framework that strengthens institutional legitimacy and supports Malaysia's leadership in SDG-aligned Islamic financial governance.