Islamic Philanthropy and Poverty Reduction in Indonesia: The Role of Integrated Islamic Social and Commercial Finance Institutions

Abstract

The recent studies about the role of Islamic philanthropy in addressing socio-economic problems have been growing and confirming its significant role in overcoming the problem. This is in line with the existence of regulations that support the effectiveness of its role in poverty reduction in Indonesia, such as Law No. 23 of 2011 on Zakat Management and Law No. 41 of 2004 on Waqf. This study has two objectives. First, to analyze the impact of Islamic philanthropy on poverty reduction as the socio-economic problems in Indonesia in the short and long run. Second, to analyze the effectiveness of integrated Islamic commercial and social-economic or finance to address the poverty compared to unintegrated one. This study used Auto-Regressive Distributed Lag (ARDL) approach to analyze annual data for the period of 2002-2019 while investigating the long and short-run relationships among variables. It found that Islamic philanthropy reduces poverty both in the short and long run, particularly in the integration of Islamic social and commercial finance in a single model. The government should therefore include Islamic philanthropy or other Islamic social finances as a fundamental strategy for building financial stability and sustainable development. (Menjamurnya studi-studi terbaru terkait peran filantropi Islam dalam mengatasi masalah sosial-ekonomi telah mengkonfirmasi peran pentingnya dalam mengatasi masalah ini. Hal ini sejalan dengan adanya regulasi yang mendukung efektivitas perannya dalam pengentasan kemiskinan di Indonesia, seperti Undang-Undang Nomor 23 Tahun 2011 tentang Pengelolaan Zakat dan Undang-Undang Nomor 41 Tahun 2004 tentang Wakaf. Penelitian ini memiliki dua tujuan. Pertama, untuk menganalisis dampak filantropi Islam terhadap penurunan tingkat kemiskinan sebagai sebuah permasalahan sosial-ekonomi di Indonesia, baik dalam jangka pendek maupun jangka panjang. Kedua, untuk menganalisis efektifitas integrasi atau antara filantropi dan komersial dalam kerangka ekonomi Islam dalam mengatasi permasalahan kemiskinan. Penelitian ini menggunakan pendekatan Auto-Regressive Distributed Lag (ARDL) untuk menginvestigasi hubungan jangka pendek dan jangka panjang antara filantropi Islam dan tingkat kemiskinan selama periode tahun 2002-2019. Penelitian ini menemukan bahwa filantropi Islam dapat menurunkan tingkat kemiskinan baik dalam jangka pendek maupun jangka panjang. Penelitian ini juga menemukan bahwa ketika filantropi dan komersial dalam kerangka ekonomi Islam diintegrasikan, tingkat kemiskinan dapat diturunkan baik dalam jangka pendek maupun jangka panjang. Pemerintah seyogiyanya menempatkan filantropi Islam sebagai kebijakan dan strategi fundamental dalam rangka mewujudkan stabilitas keuangan dan pembangunan berkelanjutan.)

A Qualitative Review on Islamic Sustainable Finance

“…Meanwhile, the word 'social' states the discussion of ISF relating to financial needs that need to be linked to social issues or problems such as poverty, unemployment, equity, and social security, so that in the end the role of Islamic finance is proven to be true and sustainable use (Ali, 2017;Hummel & Hashmi, 2019;Iskandar et al, 2021;Wulandari & Prijadi, 2021). As the research conducted by Ascarya (2021) explains that the social implications of implementing the ISF can accelerate economic recovery, so naturally the success of this ISF will reduce poverty, accelerate economic growth, assist micro and small enterprises, and increase equity so that it is achieved.…”

“…As research by Kasri & Ismail (2021) also explains sustainable business analysis including governance, transparency, and social impact created, which can add value to the waqf sector globally as part of seeking sustainable and feasible contemporary alternatives to the waqf model. This is done due to optimizing the use of waqf for sustainable finance This indicates that driving sustainable Islamic finance not only in terms of finance in banking but can be done by optimizing Islamic social financial instruments, such as waqf which in this literature has been discussed quite a lot (Abduh, 2019;Abdullah, 2014;Adnan et al, 2021, Alshaleel, 2019Aslam & Bhatti, 2021;Hassana et al, 2020;Iskandar et al, 2021;Kasim et al, 2016;Budalamah et al, 2019;Noor et al, 2016;Rosman et al, 2019;Sulaiman et al, 2019;Tajudin et al, 2020;Umar & Danlami, 2022;Zain et al, 2019;Zain & Sori, 2020) .…”

“…Unknowingly, this concept of sustainability has been used by Islamic economics. As a result, several investigations and theory tests have been carried out regarding the discussion of sustainable Islamic finance (Adewale & Zubaedy, 2019;Ahmed, 2021;Al-roubaie & Sarea, 2019;Alqahtani, 2011;Alshaleel, 2019;Ebrahim et al, 2021;Farooq & Selim, 2020;Iskandar et al, 2021;Kasri & Ismail, 2021;Khan, 2019;Khan & Badjie, 2022;Sadiq & Mushtaq, 2015;Saleem et al, 2021) to prove and develop the most effective Islamic finance model in creating sustainable Islamic finance.…”

Exploring the Development of Poverty Eradication Efforts in Southeast Asia: A Scientometric Perspective

“…While several other articles were published before "no poverty" became one of the 17 SDGs targets. In Indonesia, it is more about business development through funding assistance, institutional strengthening, strengthening regional income, and education [9, 10,[19][20][21][11][12][13][14][15][16][17][18]. In Vietnam, it is more about developing human resources, and providing funding facilities [22][23][24][25][26][27].…”

Islamic Philanthropy Institutions and Economic Empowerment of the People

“…Various studies on Islamic philanthropic institutions have been carried out, such as those conducted by Usman, Mulia, Chairy & Widowati (2020), Fauzi & Gunawan (2022), Harnia (2021), Fauzia (2017, Abidin (2021), Imawan, KS & Purwanto (2018), Efendi & Arifin (2019), Sholihah & Zaenurrosyid (2018), Jahar (2017), Addury, Adi, GH & Pangestu (2022), Ichsan (2020), Alwi, Ilham & Amir (2021), Amsari & Nasution (2019), Gwadabe & Rahman (2020), Atia (2021), Syamsuri, Arif, Sari & Faza (2020), Setiyowati (2019), Rozalinda (2015), Zuchroh (2021), Iskandar, Possumah, Aqbar & Yunta (2021), Abdullah & Jamal (2022), Yumarni MH, www.iiste.org ISSN 2222-1697(Paper) ISSN 2222-2847(Online) Vol.13, No.18, 2022 2 Suhartini, Mulayadi (2019), Muhtada (2014), Malik (2016), Ibrahim (2015), Nahar & Yacoob (2022), Syamsuri & Mokan (2021) , Achmad (2022), Adachi (2018), Febriansyah & Wahyuni (2021),shows that the existence of Islamic philanthropic institutions is able to play a role and contribute to improving people's welfare through various programs for distributing ziswaf funds (zakat, infaq, alms and waqf) to all people in Indonesia, especially in Indonesia.…”