Islamic Economic System and Poverty Alleviation (A Case Study of NWFP) Submitted By: ABDULLAH Ph.D Research Scholar Supervisor: PROF. DR. S. ZARI RAFIQ INSTITUTE OF SOCIAL WORK, SOCIOLOGY AND GENDER STUDIES UNIVERSITY OF PESHAWAR TABLE OF CONTENTS CHAPTER TITLE PAGE NO NO Abstract i-iii List of tables iv-vii Acknowledgements viii-ix CHAPTER: 1 INTRODUCTION 1-10 Rationale/justification 4 Significance of Research 6 Limitations of the study 7 Definitions of key concepts 8 Questions to be investigated 9 Organization of the thesis 9 CHAPTER: 2 LITERATURE REVIEW 11 -46 Introduction 11 Poverty and its alleviation in Pakistan 11 Causes of poverty 17 Governmental strategies for poverty alleviation in 19 Pakistan Zakat system in Pakistan 30 A comparative study of economic system for poverty 31 alleviation Socialism 31 Capitalism 35 Doctrine of welfare state 39 Theoretical framework of the thesis 41 Conclusion 44 CHAPTER: 3 RESEARCH DESIGN 47 – 65 Introduction 47 Purpose of the study 47 Objectives with regards to specific nature of this 47 study Hypotheses 48 Indicators 50 Methodology of the research 52 Population density 54 Sample size 55 Limitation of the research 56 Drawing name of district for each region through 56 random sampling method District wise description of random numbers and 57 beneficiary’s lists Sample size and sampling echniqes for chairmen of 62 zakat committees Description of random numbers of religious scholars 64 Preparation and pre-testing of interview schedules 64 Data analysis 65 CHAPTER: 4 TABULATION/ DATA ANALYSIS 66-148. CHAPTER: 5 CONCLUSIONS, MAJOR FINDINGS AND 149 RECOMMENDATIONS. Introduction. 149 CONCLUSION OF HYPOTHSES 149 Details of hypotheses approved by statistical 150 analysis. Hypothesis – 1 150 Hypothesis – 2 157 DESCRIPTION OF RESULTS ABOUT 167 OBJECTIVES OF THE STUDY Objective – II 167 Objective – II 171 Objective – III 175 Objective – IV 178 Objective – V 179 Objective – VII 184 MAJOR FINDINGS 195 - 197 Beneficiaries 195 Staff 195 Religious Scholars 196 SUGGESTIONS / RECOMMENDATIONS 198 Hiring of Professional and Motivated Staff 198 Proportional Allocation of Zakat 199 Target Orientation 199 Trust Building Campaign 200 Adequate Rehabilitation programs 200 Bibliography 201 Interview schedule 205 LIST OF TABLE TITLE PAGE NO The administrative set up of the province at a glance is as under 53 District wise sample size of beneficiaries 57 District wise sample size of zakat chairmen 62 Age and marital status of the beneficiaries 66 Educational status and level of education of beneficiaries 68 Type and size of family of the beneficiaries 69 Occupation and monthly income of beneficiaries 72 Methods of zakat disbursement 74 Showing monthly income of respondents before receiving and after 75 receiving zakat Showing reasons of no increase in income of beneficiaries 77 Showing views of beneficiaries regarding fair and transparent 79 distribution of zakat in Khyber Pukhtunkhwa (Ex-NWFP) Respondents views regarding social benefits of zakat 81 General views of beneficiaries about the prevailing system of zakat in 83 Khyber Pukhtunkhwa and suggestions for improvement Age and marital status of the zakat chairmen 86 Literacy status & level of education 88 Showing views of zakat chairmen regarding change in income of MZ 90 after receiving zakat. Showing views of chairmen/Zakat incharge about increase in the 93 number of MZ after an evident increase in Zakat budget. Showing Views Of Chairmen/Zakat Incharge about increase in the 95 number of poor in case of non-payment of Zakat. Showing views of chairmen/zakat incharge about the number of MZ 99 Rehabilitated through zakat fund Views of chairmen about the prevailing zakat system in Khyber 100 Showing views of chairmen / zakat Incharge about social benefits of 102 zakat Age and marital status of the religious scholars 104 Showing literacy status and level of education 105 Showing views of religious scholars regarding increase of purchasing 107 power by the zakat and its impact on poverty Views of religious scholars regarding preference for MZ 110 Showing views of religious scholars regarding poverty as an indicator 111 of maladies in the prevailing Islamic economic system of Pakistan Showing views of religious scholars about effective methods of Zakat 114 distribution for poverty alleviation Views of Religious scholars about hoarding of money and not 117 investing Views of religious scholars whether Zakat can increase the income of 119 the poor people or not Views of religious scholars about social benefits of Zakat 121 Views of Relgious Scholars about Relation between Zakat payment 123 & poverty General views of Relgious scholars about the prevailing Zakat 124 System Suggestions of religious scholars for improvement of prevailing 125 Zakat system ABSTRACT Poverty has been an economic as well as social concern since time immemorial. According to their respective systems and settings, various religious, sociological and economical ideologies have provided their responses varying in thoughts and actions and with different degrees of success. For instance, the socialist philosophy sought common ownership of all means of production and, therefore, proposed an agenda whereby everyone was asked to contribute according to his or her ability and get what was duly needed. In capitalism, there is over whelming emphasis on individualism, yet it also proposed a welfare state to satiate the equity demands. Because of certain extremities, with respect to the individual and the society, imbalances have been visible in the capitalistic and socialistic approaches, whereas solution lied in a balanced approach that was comprehensive as well. This leads us to yet another ideology that is ISLAM, which emphasizes the moral aspects of economic policy. Of the three monotheist religions, Islam has put the greatest emphasis upon the plight of the poor and the destitute and in the Holly Quran neglect of the poor is directly associated with the “most grievous penalty”. Moreover, although both Judaism and Christianity urge the believers to provide support for the poor, this support is of voluntary nature, whereas in Islam supporting the poor assumes an obligatory character and disregard for the poor becomes tantamount to abandoning Islam. This research was conducted to investigate the role of zakat in poverty alleviation in order to prove that whether the Islamic Economic System has potential to alleviate poverty or not? For this purpose the researcher proposed two hypotheses, one of them was that, “Greater the practice of Islamic Economic System greater would be the chances of poverty alleviation.” and another was, “Greater the transparency in the system of Zakat distribution, greater would be the chances of earning opportunities”. i There were three categories of respondents i.e. the beneficiaries, the chairmen of zakat committees and the religious scholars, with respect to these different categories of respondents the following objectives were kept in view during the study. i) To ascertain the socio-economic status of beneficiaries before and after receiving Zakat. ii) To know about the views of beneficiaries about the prevailing system of zakat, its transparent distribution, social benefits and suggestions for improvement. iii) To find out the views of chairmen zakat committees about the prevailing zakat system, improvement in the socio-economic status of Mustahiqeen-e-Zakat / beneficiaries and social benefits of Zakat. iv) To know about the views of religious scholars regarding effective methods of Zakat disbursement and relief to Musthahiqeen-e-Zakat / beneficiaries through Zakat and poverty alleviation. v) To dig out the obstacles paralyzing the role of zakat in poverty alleviation. vi) To examine, the relationship between the economic system of Islam and poverty alleviation. In order to prove the validity of theses research hypotheses and to achieve the objectives of the study the researcher selected the Khyber Pukhtunkhwa (ex-N.W.F.P) of Pakistan as the universe of the study and interviewed 600 respondents. The respondents were categorized into three categories, i.e. 200 zakat beneficiaries, 200 zakat chairmen (staff) and 200 religious scholars from ‘Kohat’, ‘Charsadda’, ‘Swat’ and Battagram. For this purpose three separate interview schedules for the beneficiaries, the zakat chairmen or staff and religious scholars were prepared and pre-tested on two respondents from each category and finalized after necessary modifications. ii Most of the beneficiaries responded that poverty alleviation is one of the social benefits of Zakat because their income has increased. According to 80% of the chairmen responded that the number of the poor people is increasing while Zakat fund given by the District Zakat Committee to the local zakat committee remains the same that is why the zakat disbursement policy of the government is not yielding the expected results. Most of the religious scholars (i.e. 80%) said that zakat can accelerate purchasing power in the market, which alleviates poverty but inspite of the fact that the zakat institution has been functioning since 1980, the widespread existence of poverty indicates defects in the existing economic system of Pakistan. Religious scholars 54% preferred indirect zakat disbursement with major focus on investing in establishment of technical institutions, cottage industries and vocational centers as would lead to prevalence of prosperity. Thus little chances of finding the zakat payees, at it happened in the regime of two caliphs (Umarain Razi Allaho