This Public Insight Note introduces CIRIC’s Zakat Research Program and the institutional perspective guiding its development. Beyond its spiritual and redistributive dimensions, zakat is approached as a complex institutional mechanism involving rules, collection systems, governance structures, accountability, beneficiary identification and channels of redistribution.

The note outlines the contemporary challenges surrounding its institutionalization and presents CIRIC’s interdisciplinary approach, combining Islamic jurisprudence, economics, public policy, governance and institutional analysis. It also introduces the program’s broader ambition: to map contemporary zakat ecosystems, assess their institutional capacity and explore how this central Islamic obligation can be translated into credible and effective institutional arrangements.

This paper argues that the contemporary paradox of Islamic finance is not primarily a doctrinal failure, nor the result of insufficient demand, but rather the consequence of uneven institutional capacity across jurisdictions. Despite strong normative appeal, sustained sectoral growth, and the expansion of Islamic finance across more than 140 countries, the industry remains unevenly institutionalized, geographically concentrated, and operationally fragmented. To explain this gap, the paper develops an institutional capacity framework structured around three dimensions: normative coherence, institutional credibility, and operational capacity. It shows that Islamic finance requires not only Shariah-compliant products, but also harmonized and intelligible standards, credible governance mechanisms, transparent Shariah supervision, effective audit structures, professional expertise, market infrastructure, and deep ecosystems. By applying this framework to current debates on standardization, Shariah governance, perceived authenticity, market depth, and ecosystem development, the paper suggests that the future of Islamic finance depends on its ability to transform Shariah principles into coherent standards, credible institutions, and operationally robust markets.

This article develops an institutional capacity framework designed to analyse the process through which shared norms are transformed into effective institutions. Building on major institutionalist approaches, it argues that institutions should not be understood merely as formal organisations or legal arrangements, but as durable systems of rules, norms, beliefs, procedures, governance mechanisms and organisational structures that shape behaviour and enable collective action. While institutionalist literature has provided major insights into transaction costs, legitimacy, conventions, collective action, institutional change and governance, comparatively less attention has been given to the full process through which a shared normative framework becomes a credible, operational and durable institutional system. The article addresses this gap by proposing a five-layer model of institutional transformation: normative framework, individual adherence, collective coordination, institutional capacity and collective outcomes. This model is not conceived as a linear or mechanical sequence, but as a dynamic process shaped by feedback loops, blockages and cumulative reinforcement. It shows that a norm may be socially recognised without being individually internalised, individually accepted without generating collective coordination, collectively practised without being institutionally supported, or formally institutionalised without producing the expected collective outcomes. The article further defines institutional capacity through three interrelated dimensions: normative coherence, institutional credibility and operational capacity. By combining these five layers and three dimensions, the framework offers both a theoretical contribution to institutional analysis and a diagnostic tool for policymakers, organisations and institutional ecosystems.