As one of the fundamental tenets in Islam and central to Islamic economy, zakah, theoretically, has
a wide and profound impact on socio-economic development of a nation. This paper attempts to examine the
current zakah system in Malaysia particularly its contributions towards poverty alleviation as well as
drawbacks that are limiting its overall impact on the country’s development. A comparison is made on zakah
collection and distribution between two states in Malaysia each at two different extreme of the poverty line.
This paper further introduces a model of zakah system as a way forward towards a more holistic and widereaching
implementation of zakah in Malaysia.