The nexus between zakat and poverty reduction, is the effective utilization of zakat necessary for achieving SDGs: A multidimensional poverty index approach

Abstract

This study develops and validates a comprehensive mechanism for evaluating the effect of zakat (obligatory alms‐giving) on reducing poverty and attaining some of the prominent Sustainable Development Goals. The study unconventionally analyzes the effect of macrolevel data on microlevel data on district level of Khyber Pakhtunkhwa, Pakistan. Microlevel data are utilized from a renowned national survey, Pakistan Social and Living Standards Measurement Survey (PSLM) from which the Multidimensional Poverty Index (MPI) has been computed, whereas the macrolevel data have been collected from Zakat & Usher Department Khyber Pakhtunkhwa. Based on the nature of nested data set, we have used a multilevel model to counter intra‐class correlation. The findings confirmed and validated that the novel aspect of the zakat negatively affects the multidimensional poverty and portray significant contribution in targeting several Sustainable Development Goals (SDGs) in Pakistan. Based on the empirical evidence, Zakat being as an obligatory arm which equips individuals to fulfill their necessities, this paper suggests necessary strategies toward zakat disbursement. The mechanism should be refined to stimulate economic growth and pursue SDGs via financial empowerment of less advantaged class of society by reducing poverty in developing countries like Pakistan. Moreover, the methodology adopted in the study opens doors for more enabling and conducive research practices in order to decompose the results and design policies accordingly.

The Impact of Income Inequality, Renewable Energy Consumption, Non-Renewable Energy Consumption and Per Capita Income on Poverty: Evidence from BRICS Economies

“…The variables used in the study are measured as follows: different variables are used as measures of poverty in empirical studies. Headcount-based data for the poor (Omar and Inaba, 2020;Baloch et al, 2020;Kousar and Shabbir, 2021;Solarin, 2021;Ogbeide-Osaretin, 2021), income (Adekoya, 2018), infant mortality (Tsaurai, 2018;Magombeyi and Odhiambo, 2018;Khobai, 2021;Solarin, 2021), life expectancy (Magombeyi and Odhiambo, 2018;Tsaurai, 2018), multidimensional poverty index (Aziz et al, 2020;Osinubi and Olomola, 2020) and human development index (Nwani and Osuji, 2020) are used as proxy for poverty in some studies. Some other studies used per capita consumption expenditure as proxy for poverty due to the lack of data on poverty (Quartey, 2008;Odhiambo, 2009;Odhiambo, 2011;Nayasha, Gwenhure and Odhiambo, 2017;Sehrawat and Giri, 2018;Adeleye et al, 2020;Dada and Fanowopo, 2020;Garidzirai and Matiza, 2020).…”

Islamic (Partner) Accounting and its Comparison with International Financial Accounting Standards (IFRS)

“…Zakat acts as a mechanism for distributing benefits, designed to bridge the gap between the rich and the poor [31]. This mechanism increases the purchasing power of the poor and should contribute to economic growth by increasing consumer spending and aggregate demand.…”

Zakat, Infaq, Sadaqah on Mustahik Income to Realize No Poverty in Indonesian Zakat Institution

“…Suprayitno et al (2017) found that zakat has a positive and significant effect on SDGs in five Malaysian states. Aziz et al (2020) found that zakat was able to reduce multidimensional poverty and made a significant contribution to several SDGs in Pakistan. That means there is no direct data collection for each mustahik of the zakat funds.…”

“…However, some empirical studies above have not discussed the role of zakat fund management carried out by LAZ in realizing SDGs number 1 (no poverty). In addition, the data used are still macroeconomic, such as the human development index in Malaysia (Suprayitno et al, 2017) and the multidimensional poverty index in Pakistan (Aziz et al, 2020). Moreover, research conducted by Abduh (2019); Amalia et al (2020); Dembele and Bulut (2021) is still at the conceptual level about the role of zakat and the Islamic social fund.…”