Abstract
While Zak¯ah has a significant effect on reducing income poverty, its impact on multidimensional poverty (deprivation in health, education, and living standard) has not been studied much. Since the size of impact depends on accuracy of Zak¯ah targeting and its coverage, this paper assesses the accuracy of Zak¯ah targeting and coverage by computing Multidimensional Poverty Index (MPI) for Last Year’s Zak¯ah (LYZ) recipients and LYZ non-recipients using Pakistan Social and Living Standard Measurement (PSLM) survey (2014). The impact of LYZ transfer on multidimensional poverty is estimated using Propensity Score Matching (PSM) method to control for confounding factors by comparing treatment (LYZ recipients) and control (LYZ non-recipients) groups. The higher MPI of treated group shows accuracy of targeting. The average-treatment effect (ATE), average-treatment effect on the treated (ATET), and potentialoutcome mean (POM) estimates show small impact of LYZ payment on total weighted and individual deprivations in the short-run. However, the statistical insignificance of ATE and ATET shows insufficient coverage as well as the possibility of reaching out to income-poor, but not to multidimensional-poor. This implies that public Zak¯ah committees should disburse the Zak¯ah based on multidimensional poverty status for efficient use of Zak¯ah funds for the alleviation of multidimensional poverty.
Highlights
One of the targets of Sustainable Development Goals (SDGs; target 1.2) is to reduce multidimensional poverty at least by half by 2030
There are eight indicators for the deprivation in standard of living in PN-Multidimensional Poverty Index (MPI), but we have questions related to four indicators and sufficient observations are available on two indicators in the Pakistan Social and Living Standard Measurement (PSLM)
The accuracy of Zakah targeting, coverage, and the impact of Zakah on multidimensional poverty have been evaluated in the study using impact-evaluation methodology
Summary
One of the targets of Sustainable Development Goals (SDGs; target 1.2) is to reduce multidimensional poverty at least by half by 2030. The Zakah collection by State Bank of Pakistan through all banks during the same period increased by Rs. 712 Million (17.76%) It is, interesting, and worthwhile to study the role of Zakah in the significant decline in poverty, in multiple dimensions. The two conditions are necessary for a person to be eligible to pay Zakah on wealth excluding agriculture produce and animals: 3 1) One must possess surplus wealth above or equal to the threshold called Nis.ab. This threshold is the lowest amount on which Zakah is due. If the reach-out of the Zakah system is poor, some people who are eligible Zakah-recipients might not be receiving. 5
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