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.
Highlights
The degree of poverty can be measured at the national level by observing the percentage of the population living under national poverty lines
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 poverty measures will be estimated on both data sets on the basis of national poverty line (PLI) at MYR 740, to see the effect of zakat distribution on poverty to the society
Summary
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). 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 the world economy has grown intensively. 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. One of the most important principles of Islam is that all things belong to Allah S.W.T, and that wealth is 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
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