Academic journal article Asian Social Science

The Effectiveness of Zakat in Reducing Poverty Incident: An Analysis in Kelantan, Malaysia

Academic journal article Asian Social Science

The Effectiveness of Zakat in Reducing Poverty Incident: An Analysis in Kelantan, Malaysia

Article excerpt

Abstract

This study attempts to examine the effectiveness of monthly zakat distribution as a mechanism to poverty reduction in the state of Kelantan. The target population of this study is the masakin (poor) and fuqara (hardcore poor) (Note 1) categories of the Kelantan Islamic Religious Department (MAIK) (Note 2) zakat recipients. Simple Random sampling procedure is applied to collect primary data related to zakat recipients from the poor and hardcore poor category of ten districts of Kelantan. The effects of zakat distribution on poverty are analyzed within the context of burden of poverty; specifically in terms of incidence, intensity and severity of poverty. These are examined using four major indices of poverty, which include the Headcount Index, Average Poverty Gap, Income Gap and Sen Index. Results revealed that zakat distribution reduces poverty incidence, reduces the extent of poverty and lessens the severity of poverty. Further, the current zakat distribution in Kelantan only gives a small effect on increasing the income of the poor. Hence, by locating the perfect amount of zakat distribution to eliminate poverty and to offer alternative zakat distribution model is the best way in reducing the income inequality and maximization of social welfare.

Keywords: Zakat distribution, poverty alleviation, poverty measures, Kelantan, Malaysia

JEL Classification: I13, O01

(ProQuest: ... denotes formulae omitted.)

1. Introduction

The degree of poverty can be measured at the national level by observing the percentage of the population living under national poverty lines. The usual measurement is by using US$1 and US$2 (at 1993 Purchasing Power Parity terms) at reference poverty lines (Note 3). It is estimated that 20 percent (1.2 billion) of the people in the world live on US$1 a day and 46.7 percent (2.8 billion) of them live on $2 a day (World Bank, 2001, p. 3). The corresponding percentages of poverty for International Development Bank (IDB) member countries indicate that a relatively large percentage of the populations of these countries are poor although the world economy has grown intensively.

In addition, Islam had brought a method on solving the problem of poverty. Islam makes it obligatory on every Muslim to pay a certain "tax", called Zakat, on their accumulated wealth. The money collected from this Zakat is distributed among the hardcore poor (Fuqara) and poor (Masakin). One of the most important principles of Islam is that all things belong to Allah S.W.T, and that wealth is therefore held by human beings in trust. The wealth is purified by setting aside a proportion for those in need, and, like the pruning of plants, this cutting back balances and encourages new growth in our wealth.

2. Zakat and Poverty Alleviation

Zakat is one of the five fundamental obligations of Islam. It is an obligatory form of worship (Ibadah) prescribed by Allah s.w.t. Allah commanded in the Qur'an:

... so establish Salat and give Zakat, and hold fast to Allah

(Al-Qur'an 22:78)

The institutions of zakat are among several instruments instituted by Islam to combat and enhance welfare in the society. Zakat helps generate a flow of funds and at the same time increase the consumption of the poor and needy. The word zakat means growth, cleanness and purity in Arabic (Ibn Faris, 1998). The Qur'an mentions the word zakat 30 times and at three places it appears as being commanded by God (Allah s.w.t). Zakat is often called sadaqah in the Qur'an. The importance of zakat as an obligation on Muslims is also emphasized in many sayings of the Prophet Muhammad (pbuh). The importance of zakat may be established from a saying of the Prophet (pbuh) in which he indicates that refusing to pay it signify a rebellion against the Islamic State (Mujahid, 2007). Hence, zakat can be considered as an essential form of worship and spiritual purification.

In Kelantan, the collection of zakat is increasing from time to time. …

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