ZAKAT AND POVERTY ALLEVIATION IN INDONESIA: A PANEL ANALYSIS AT PROVINCIAL LEVEL

Abstract

As a pillar of Islam and an instrument for poverty alleviation, zakat is perceived as aneffective tool for tackling the problem of poverty in the Muslim world. However,whether zakat is effective in improving indicators of both quantity and quality ofpoverty is still a question requiring empirical investigation. This study is aims toempirically investigate the role of impactful zakat in poverty alleviation as indicated bythe BAZNAS prosperity index (Indeks Kesejahteraan BAZNAS or IKB), at provinciallevel in Indonesia. This study covers annual data from 28 provinces in Indonesia forthe years 2017 and 2018. Data analysis uses a panel-data approach, with threeindicators of poverty – the poverty headcount ratio (P0), poverty gap index (P1), andpoverty severity index (P2) – as dependent variables. The study finds that higherBAZNAS IKB, used as a sign of impactful zakat, significantly reduces P0 but hasinsignificant effect on P1 and P2. The results of this study imply that zakat managersshould put emphasis on the poorest section of the poor population to enableimprovements in poverty indicators through zakat utilization.