The potential of Islamic social finance to alleviate poverty in the era of COVID-19: the moderating effect of ethical orientation

Abstract

Purpose This paper aims to explore the potential of the awareness and knowledge of Islamic social finance (zakat, waqf and Islamic microfinance) to alleviate poverty during the COVID-19 pandemic with the moderating effect of ethical orientation. Design/methodology/approach The data were collected through the administration of paper-based and electronic questionnaires to 400 respondents out of which only 277 were found valid for analysis. Findings The study showed that by direct relationship, the awareness and knowledge of Islamic social finance instruments have a potentially significant positive contribution to poverty alleviation during the COVID-19 pandemic except for zakat that has an insignificant positive contribution. Ethical oriental has also a significant positive contribution. Contrary to expectation, the moderating effect of ethical orientation has changed zakat and waqf to have significant negative and insignificant positive contributions, respectively. Only Islamic microfinance has endured the moderating effect to continue contributing significantly and positively to the reduction of poverty. Research limitations/implications The study explored only the potential impact of the awareness and knowledge of Islamic social finance to mitigate the extreme poverty caused by the COVID-19 pandemic in Nigeria. Practical implications This study clearly showed the need to create enabling laws and policies to support the operations of zakat and waqf institutions to achieve their objectives effectively and efficiently. These two institutions should be integrated with Islamic microfinance for the possibility of getting better outcomes. Social implications There should be massive campaigns to restore religious, social and political ethics to enhance the socio-economic development of Nigerians based on the principles of brotherhood. Originality/value This study provides unexpected and unusual results showing the inability of zakat and waqf institutions to alleviate poverty due to poor ethical orientation.

Charitable Behavior of Muslim in Indonesia during the COVID-19 Pandemic: A Tobit Model Analysis

“…After a literature study regarding several variables considered rational to be used as determining factors in prosocial action, model specifications were adopted in several studies. Some of the variables adopted are gender (Kamas & Preston, 2021;Rietveld et al, 2013), Age (Lockwood et al, 2021), Education (Umar et al, 2021;Smith, 2016;Rietveld et al, 2013, Employment (Smith, 2016, length of stay (Allen, 2018), and expenses (Clotfelter & Steuerle, 1981;James & Sharpe, 2007). This study includes the variable of family size that explains the number of dependents.…”

“…Zakat is also used to reduce the impact of the COVID-19 pandemic that leads to the consideration of Islamic social finance instruments (Umar et al, 2021). It was done to help community finance (Micro, Small, and Medium Enterprises) as well as to finance other productive purposes (Hassan & Noor, 2015).…”

Developing an integrated model of Islamic social finance: toward an effective governance framework

“…Additionally, several previous studies, such as the ones by Alaro and Alalubosa (2019) , Rohman et al. (2021) , and Umar et al. (2021) , state that Islamic microfinance can play a role in reducing the level of poverty that occurred in the community.…”

“…Islamic microfinance is one of the instruments that can positively contribute to the empowerment of the community by providing welfare, creating value, and increasing people's living standards (Usman & Tasmin, 2016). Additionally, several previous studies, such as the ones by Alaro & Alalubosa (2019), Rohman et al (2021), and Umar et al (2021), state that Islamic microfinance can play a role in reducing the level of poverty that occurred in the community.…”

“…(2021) ✓ ✓ ✓ 10 Ascarya (2021) ✓ ✓ ✓ 11 Kuanova et al. (2021) ✓ ✓ ✓ ✓ ✓ ✓ 12 Ascarya (2022) ✓ ✓ ✓ ✓ 13 Shuaib and Sohail (2022) ✓ ✓ ✓ 14 Umar et al. (2022) ✓ ✓ ✓ Source: Compiled by Authors (2021).…”