Zakat for Poverty Alleviation and Income Inequality Reduction

Abstract

This research aims to analyze the role of zakat distribution programs for poverty allevation and income inequality reduction among groups in urban and rural areas. It takes the case study of 1,309 zakat beneficiaries managed by the National Zakat Board of Indonesia (BAZNAS) as the coordinating zakat institution in Indonesia, in five different cities and regencies in West Java Province namely, Bogor, Depok and Sukabumi. The analytical tools used in this study are the modification of the Center of Islamic Business and Economic Studies (CIBEST) model, CHAID analysis, Deciles method and Gini coefficient. This study suggests that the present zakat distribution programs can significantly alleviate poverty and reduce income inequality among the observed zakat beneficiaries. It is also found that spiritual supervision and routine assistance form BAZNAS officers, informal education, family size, age and job of the respondents are the variables that are statistically significant in influencing the increase of the households’ monthly income and spirituality.

The Role of Integrated Islamic Commercial and Social Finance in Reducing Income Inequality in Indonesia

“…That is in line with numerous studies which aim at dealing with the same issue: inequality, as can be seen in the recent works conducted by Johari et al (2014) in Malaysian case; Beik (2013); Beik and Tsani (2015); Ayuniyyah et al (2017); Ayuniyyah et al (2018) in Indonesia. Most of the previous works, particularly related to prominent role played by zakah have been carried out in micro perspective by, notably, analyzing the primary data derived from zakah beneficiaries, which often consists of material aspect in the form of income before and after receiving zakah as well as spiritual aspects.…”

“…This implies that zakah can serve more influential role in tackling this problem in urban area as an increase in zakah collection by 1 percent in that area leads to a 0.00063 percent decrease in disparity. This finding confirms the recent study conducted in Indonesia by Ayuniyyah et al (2018) who took micro perspective using primary data from zakah beneficiary's three areas in West Java including Bogor, Sukabumi and Depok. They found a greater reduction index of inequality, as represented by Gini coefficient, in urban area by 0.019 compared to the rural one with 0.011.…”

“…The study by Jehle (1994) might be the first that has dealt with the problem of inequality in Pakistan by using survey data and suggested accordingly the effectiveness of zakah in tackling inequality. In Indonesia, seminal work by Beik (2013) reveals compelling evidence regarding the substantial role performed by zakah for inequality alleviation in DKI Jakarta, which has subsequently been developed by Ayuniyyah et al (2017) and Ayuniyyah et al (2018) to investigate whether the consumptive-based and productive-based distribution of zakah in West Java are also successful in dealing with this matter.…”

“…Therefore, the recent studies pertaining to the role played by zakah in addressing the socio-economic problems, most notably income inequality, have been growing and confirming the significant role of zakah in overcoming this problem. Among the recent studies were undertaken by Beik (2013), Beik and Tsani (2015), Ariffin (2017 &2018) for the case Indonesia; Johari, Ab Aziz, and Ali (2014) for the case of new convert (Muallaf) in Malaysia; Abdelbaki (2013) for the case of Bahrain.…”

Hashtags as a way to expedite the zakat supply chain

“…Zakat is one of the most powerful Islamic instruments to support the global poor, providing assistance to the financially weak and those who cannot afford their daily expenses. As an instrument of social welfare (Ayuniyyah et al, 2019;Weiss, 2002), those of a certain level of wealth are expected to pay a specific portion of their income (generally 2.5%) as Zakat (Ciftci, 2019).…”