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Investigating the Impact of Zakat on Poverty Alleviation: a Case from West Sumatra, Indonesia

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Investigating the Impact of Zakat on Poverty Alleviation: a Case from West Sumatra, Indonesia International Journal of Zakat Vol. 4(2) 2019 page 1-12 Investigating the Impact of Zakat on Poverty Alleviation: A Case from West Sumatra, Indonesia Dian Fitriarni Sari, Irfan Syauqi Beik and Wiwiek Rindayati IPB University ABSTRACT Muslim population in West Sumatra is vast, thus, it has significant potential of zakat. In the province, the regulation of compulsory zakat which is directly deducted from the local State Civil Apparatus (ASN) salaries has been practiced. This regulation has a positive impact on the collection of zakat funds in West Sumatra, yet the position of zakat in reducing poverty in the province demands a discussion in scholarly work. This study appointed 200 respondents and employed poverty indicators to investigate the impact of Zakat on poverty alleviation in the province. The results indicated that zakat promotes poverty reduction. This research also proves concisely the poor can exit the poverty line with Zakat. This work implies the role of government in supporting Zakat as monetary tool in poverty alleviation. Keyword: Zakat, West Sumatera, Exit Poverty, BAZNAS INTRODUCTION to be significant enough to achieve the target in reducing poverty (Kahf, 1997). Poverty is an individual situation, not Zakat is included as the third pillar of individual characteristics or behavioural Islam. Zakat in Islam is not just worship patterns (Watt, 1968). This point of view and virtue but also an important role in leads to the definition of poverty as a economic growth that has an impact on situation where individual consumption the people welfare. is minimal, while prosperity is defined as Indonesia as the fourth-largest a situation where there is a slight population in the world with 87.21 narrowing of consumption. Poverty is percent is Muslim (Ministry of Religion, most often classified as something 2016). Of the percentage of Indonesian chronic and temporary (Murdoch, 1994). poor population is 9.41 per cent. In Poverty is still an interesting topic general, this indicates that the discussed in the field of research. One Indonesian Muslim population with way to calculate the depth of poverty is poverty levels can be balanced with the by measuring the poverty gap, existence of zakat. measuring how far the average poor Based on research by Firdaus et. person or poor family is below poverty al. (2012), the potential of national zakat thresholds. Islam has Zakat as an in 2011 reached 3.4 percent of total gross instrument to reduce poverty. domestic product, or in other words the Hassan and Khan (2007) said that potential of zakat in Indonesia was Zakat is one of the most powerful tool in estimated at Rp.16.6 billion. The poverty alleviation. Zakat yield is potential of zakat in Indonesia described enough to cover needs. That is, the is not yet supported by the collection of assumption of zakat must be based on zakat fund (Puskas BAZNAS 2019). The Shariah opinion which allows the results latest data shows that there is a gap 2 International Journal of Zakat Vol. 4(2) 2019 between the potential of zakat and its 2016),with a percentage of poverty of collection. This can be seen from the data 6.42 per cent. This certainly supports the on the collection of national zakat, by the existence of a large potential of zakat of official zakat management organization Rp.120.7 million UD West Sumatra in 2015 which reached Rp. 252.8 million (Firdaus et. al. 2012). The zakat fund in or less than 1.3 percent of its potential Indonesia is managed by the national (Puskas BAZNAS, 2016). board of zakat, Republic of Indonesia One of the provinces in Indonesia (BAZNAS). This institution is operated which has considerable potential is West in the nationwide of Indonesia. Sumatra with a population of more than BAZNAS West Sumatra is one of the 5 million people where 97.42 per cent is institutions that has been collecting the Muslim (Ministry of Religion, highest amount of zakat funds. Table 1. Total Collection and Distribution of Zakat Funds in BAZNAS West Sumatra 2013-2018 Percentage Percentage Collected Zakat Distributed Zakat Years difference difference Funds (Rupiah) Funds (Rupiah) (%) (%) 2013 5 698 039 385 - 4 313 818 278 - 2014 6 826 525 113 0.19 5 069 317 746 0.17 2015 7 463 013 735 0.09 5 966 826 320 0.17 2016 11 149 385 130 0.49 6 845 752 500 0.14 2017 8 519 615 809 -0.23 8 838 308 200 0.29 2018 12 815 438 981 0.50 8 134 607 000 -0.07 Source: BAZNAS Province of West Sumatra 2018 Table 1 informs that there is an institutions from Zakat, almsgiving and increase in zakat funds collected from endowments to fight poverty. Therefore, 2013 to 2017 in BAZNAS West this study aims to investigate the impact Sumatra. In the previous research on of zakat on poverty alleviation, with a zakat as a reduction in poverty by Hassan special case from West Sumatra, and Khan (2007), it is mentioned that; Indonesia. 1) Zakat can alleviate the targeted budget category for poverty alleviation for other budget LITERATURE REVIEW needs. 2) Zakat can increase the potential Zaim (1989) and Powell (2010) for taxation through increased explained that Zakat can be literally productivity, employment and translated as “purity” or, in verbal form results. “to be pure”. In the context of English, zakat is usually translated as Various policies and strategies “almsgiving”, meanwhile in al-Qur’an, it have been adopted to reduce poverty, but refers to as ease the burden of the poor, the fact remains that poverty still exists. as money, food, or clothing; charity gift Muslim countries inherit powerful (Powell, 2010; Bukowski, 2014). Investigating the Impact of Zakat on Poverty Alleviation:…… 3 In a simplified context, zakat is a mandatory zakat deduction on the an obligation imposed on a Muslim who income of all Muslims. In the country, has attained Nisab and must pay 2.5 Zakat management is under the authority percent of the income he gets for one of the state government. year. The Payment of zakat can be in the The concept of zakat itself is a form of property owned. The 2.5 percent fundamental basis for Islamic economics is not a fixed amount and may be to bring a balance between rich and poor modified depending on the property people and also to strengthen the subject to zakat. nation’s entire economy and a large Zakat has a positive effect on worldview (Al-Mamun & Haque, 2015). economic growth. Paying Zakat However, like a strategy to reduce promotes the growth of faith and poverty, the capacity of the poor must be economic growth. As a redistribution of developed through health, education, income and wealth and reducing the vocational training facilities, and others. phenomenon of inflation and poverty, So that poor people can get out of trap other social and economic problems. poverty. In addition, business Miah (1992), Sarea (2012), entrepreneurship must also be developed Bukowski (2014), Bakar & Rahman based on priority. (2007) elaborated that zakat serves as a The entrepreneurship unique mechanism for mandatory development program has the possibility transfers of income and wealth to bridge to not only eliminate poverty but also the gap between the rich and the poor in create employment opportunities for society. Zakat can gradually increase poor people. Proper payment of zakat employment and income in the amount with the right method to economy, thereby increasing people’s eliminate poverty from Muslim living standards and ultimately communities will ultimately help bring increasing the aggregate volume of zakat peace, harmony and prosperity to the collections. On this point, zakat has a Muslim world (Hoque, et al., 2015). positive impact on the rate of economic In the study done by Shirazi growth in terms of poverty alleviation (2014), it was highlighted the critical and reduction of unemployment role of zakat in poverty alleviation in (Ahmad, 1989). Bangladeshi context. In that, zakat funds Study in Bangladesh by Hassan is believed to replace government budget and Khan (2007) found that the good expenditures in the range of 21 percent management of zakat can reduce of the Annual Development Plan (ADP). international monetary assistance (debt), Furthermore, zakat can increase which significantly reduce the national productivity, employment, and output debt (Hassan & Khan, 2007). Some which consequently will increase the economists project that in 2004 to 2005, government’s tax potential. the potential of zakat funds could Unfortunately, the government and the contribute in reaching 43 percent of global stakeholders seem to be less Bangladesh’s annual development plan aware to include zakat as an instrument (Shirazi & Amin, 2009). of poverty alleviation. The following study in Malaysia Regarding zakat distribution, it illustrates the approach to strengthening has a significant and positive influence the existence of the zakat system in on increasing income distribution for the Malaysia’s socio-economic developent. poor and needy (Ali et. al., 2013). In a It is similar to a tax deduction on salaries, study with the Human Development 4 International Journal of Zakat Vol. 4(2) 2019 Index (HDI), it can be concluded that household. Based on secondary data, the there was indeed an increase in the HDI amount of data used is 200 respondents of Mustahiks (zakat recipients) taken from all cities and regencies in households in the period being observed. West Sumatra, Indonesia. There are several possible reasons why This study uses the method of Mustahiks who received productive calculating the Poverty Indicator and zakat assistance are improved their Average Time Taken to Exit Poverty. welfare status. In this regard, it is due to The analysis of this study assesses how the investments in productive capital, in the positive impact of zakat on poverty addition to having microfinance which and also calculates how many years the can encourage growth in income and community estimates can get out of the fulfill basic needs.
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