The Role of Zakat in Alleviating Multidimensional Poverty

Abstract

The potential of zakat is huge to be ignored by the world. Recently, the notion to integrate zakat on the Sustainable Development Goals has grown rapidly. Nevertheless, the impact of zakat in Indonesia has not been pronounced could doubt the adoption of zakat as a global tool. This paper aims to investigate the impact of zakat on monetary and multidimensional poverty by using the National Zakat Index developed by BAZNAS. Two component of the index that cover the environmental and impact of zakat is employed to sharpen the analysis. The main method used is multiple linear regression with control variables to identify the impact of zakat on multidimensional and monetary poverty. The analysis is also conducted to evaluate the performance and development of zakat in Indonesia. The result informed that the environment for zakat to grow in Indonesia still needs to be improved, particularly in Java. Meanwhile, the micro NZI that represent the performance of institution and impact of zakat on mustahik is the only variable that are significant to multidimensional poverty. Thus, it is recommended for the government to adopt a mandatory system of Zakat in Indonesia because it can give great benefits to Indonesia in alleviating poverty and achieving SDGs in 2030.

Impact of Zakat Distribution Channels on Poverty Alleviation in Indonesia

“…Making zakat money easily available through wide geographical coverage, a straightforward application process, and inclusivity is crucial to reaching disadvantaged groups and maximizing its effectiveness in reducing poverty (Titin et al, 2022). These results have practical consequences for policymakers, zakat groups, and the broader society, highlighting the importance of enhancing the effectiveness of zakat organizations, promoting government assistance, raising social consciousness, and enhancing the availability of zakat money (Pratama, 2023).…”

“…Zakat's redistributive aspect not only offers instant help to the less fortunate but also helps in establishing a fairer society over time. This literature review seeks to explore the theological foundations of zakat in order to offer a fundamental grasp of its importance in addressing poverty (Al-Bawwab, 2023;Muhafidin, 2023;Mulyadi & Abdullah, 2022;Pratama, 2023). Zakat addresses the communal action issue by altering the structure of giving and can act as a distinctive remedy to the free-rider challenge in voluntary charity (Info, 2022).…”

“…An inclusive strategy is required to deal with the connection between the effectiveness of zakat organizations, government participation, public consciousness, and availability in reducing poverty (Pratama, 2023;Titin et al, 2022). Studies have indicated that zakat organizations in Indonesia have carried out successful initiatives to reduce poverty, focusing on consumption, social, health, and education programs (Utami, 2023).…”

“…The empowerment initiatives carried out by zakat organizations in Indonesia focus on the capabilities of Mustahik and take into account the lasting effects on enhancing the economy of the beneficiaries, resulting in a decrease in poverty (Titin et al, 2022). Nevertheless, it is important to enhance the conditions for zakat to expand in Indonesia, especially in Java, and to implement a compulsory zakat system to fully utilize its capacity in reducing poverty and reaching the Sustainable Development Goals (SDGs) (Pratama, 2023). Through skilled administration and the involvement of all sectors of society, zakat could help boost the economy and aid in decreasing poverty in Indonesia (Muhafidin, 2023).…”

The Productive Zakat in Empowering Mustahik Entrepreneurship

“…Thus, mustahiks have jobs and regular income for their economic sustainability. In addition, creative and innovative ideas grow from the mustahiks [12].…”