Is it permissible to pay Zakat on wealth to fund small development projects for the poor, and what if those projects fail?

The basic principle is that zakat is given to the poor to own and dispose of. The Islamic Fiqh Academy has permitted the investment of zakat funds in investment projects, provided that the needs of the zakat recipients are met first, that there are sufficient guarantees to avoid losses, and that the process concludes with the rightful recipients owning the zakat, or that it remains under the purview of the legitimate authority responsible for collecting and distributing zakat.