A mediating effect of business growth on zakat empowerment program and mustahiq’s welfare

Abstract

Zakat is an instrument of Islamic economic and social funds that contributes to the achievement of people wellbeing. This study examines the business growth as a mediating variable on the relationship between the impact of the zakat empowerment programs and mustahiq's (zakat recipient) welfare. This quantitative study employs Partial Least Square Structural Equation Modelling (PLS-SEM) analysis on 100 mustahiqs from different zakat empowerment programs in East Java and DI Yogyakarta. Zakat empowerment positively affects mustahiq's welfare. This indicates that the empowerment program successfully increases mustahiqs' wellbeing and their business. Business growth as a mediating variable on the relationship between business assistantship and mustahiq welfare also shows a positive and significant effect. Further, macroeconomic indicators consisting of GRDP and inflation and internal factors consisting of age and educational level, have different impacts on the business growth of mustahiq. This study confirms the zakat empowerment program's role in improving the mustahiq's welfare based on maqashid al-shariah (the Islamic objectives). Zakat community empowerment is a solution to suppress the poverty rate and possible for reducing inequality and ending poverty in Indonesia. This study extends Tika Widiastuti ABOUT THE AUTHORS Tika Widiastuti is a lecturer and researcher at the Faculty of Economics and Business, Universitas Airlangga. She holds a doctorate in Islamic Economics. Her research interest includes zakat governance and Islamic economics. Ilmiawan Auwalin is a lecturer and researcher at the Faculty of Economics and Business, Universitas Airlangga. He holds a Ph. D in Economics from the School of Economics, the University of Sydney. His research interest includes economic development, labor market studies, and micro and small enterprises development. Lina Nugraha Rani is a lecturer and researcher at the Faculty of Economics and Business, Universitas Airlangga. She holds a Master in Islamic Economics. Her research interest includes Islamic economics, Islamic Finance and Banking.

Integrating sustainable Islamic social finance: An Analytical Network Process using the Benefit Opportunity Cost Risk (ANP BOCR) framework: The case of Indonesia

“…Sari et al [ 73 ] show that by distributing zakat, the time taken by the poor to exit poverty is faster (3.3 years) than without zakat (6.6 years). In addition, a study conducted by Widiastuti et al [ 3 ] analyzed financing programs carried out by the ISF institutions, including Yatim Mandiri, Dompet Dhuafa, Inisiatif Zakat Indonesia, Nurul Hayat, YDSF, and Dompet Amanah Umat, and found that they have a significant impact on increasing the welfare of the poor. The distribution aspect, particularly productive distribution, holds the key to success in ISF integration in transforming the poor into the capables [ 69 ].…”

“…The second instrument is infaq and sadaqah , which are the voluntary gifts by capable people to seek the pleasure of Allah [ 44 ], significantly to help the needy. Zakat, infaq , and sadaqah are economic instruments that support economic growth by increasing the purchasing power of the needy [ 3 , 31 ].…”

“…Second, qualified human resources with leadership qualities are needed [ 53 ]. Third, the beneficiary’s desire and ability to develop and change into muzakki or munfiq are required [ 3 , 54 ].…”

“…Islamic Social finance (ISF), which includes zakat, infaq , sadaqah , waqf, and Islamic microfinance, is critical to promoting a long-term economic development [ 1 – 3 ]. Islamic social finance has a vital role in solving the problem of poverty [ 3 – 6 ], income inequality [ 7 ], global education [ 8 , 9 ], health access [ 10 ], and various other socio-economic problems.…”

“…Islamic Social finance (ISF), which includes zakat, infaq , sadaqah , waqf, and Islamic microfinance, is critical to promoting a long-term economic development [ 1 – 3 ]. Islamic social finance has a vital role in solving the problem of poverty [ 3 – 6 ], income inequality [ 7 ], global education [ 8 , 9 ], health access [ 10 ], and various other socio-economic problems. The role of Islamic social finance instruments is not only in the majority Muslim countries, but also in minority Muslim countries, such as the role of zakat in providing supportive programs for the poor in Singapore [ 11 ], the role of Islamic social finance to support economic resilience in the UK [ 12 ], and the role of zakat in creating prosperity in Germany, France, and Croatia [ 13 ].…”