Poverty persists as a global challenge, particularly in economically underdeveloped Islamic countries. Despite government efforts to address income inequality and reduce poverty, these issues continue to afflict societies. To effectively confront this pressing problem, it is imperative to scrutinize the impact of Zakat, a crucial institution in Islam, and its potential contribution to alleviating these challenges. Zakat, one of Islam's five pillars, plays a pivotal role as a guiding economic force and a form of worship. It serves as a means of social assistance and solidarity, fostering stronger bonds between the donor and the recipient. Zakat cultivates feelings of love, compassion, and mercy while also mitigating jealousy, envy, and hostility. Furthermore, it operates as a mechanism for income redistribution in societies marked by unequal wealth distribution. This long-standing practice is rooted in the belief that wealth is a trust from Allah and underscores the importance of sharing it with those in need. Zakat has the potential to address a range of economic issues, from supporting the marriages of impoverished individuals to tackling unemployment. It remains significant as an expression of social responsibility and a means to promote justice and compassion, ultimately creating a more equitable income distribution. The objectives of Zakat are multifaceted, encompassing goals such as poverty alleviation, wealth redistribution, strengthened social bonds, wealth purification, meeting basic needs, and empowering vulnerable individuals. However, in Muslim-majority countries such as Bangladesh, the impact of zakat distribution is often inadequate due to a lack of self-discipline and understanding among Muslims. Additionally, the economic recession triggered by COVID-19 has exacerbated poverty in Bangladesh, with adverse effects on employment and a significant increase in poverty rates among low-income workers. Fair and Shariah-compliant zakat distribution remains underutilized in these regions, including South Asian countries within the Organization of Islamic Cooperation. The ease of collective cash or clothing distribution in zakat practices has led to inaccurate assessments of the genuinely needy. This traditional approach has also drawn criticism for its deviation from Islamic principles. This study examines changing perceptions and practices of zakat distribution in Bangladesh, focusing on promoting effective and equitable distribution methods. These methods may include income-generating expenditures, vocational training, microfinance initiatives, and targeted cash transfers. By adhering to Zakat's authentic principles and purposes, Bangladesh can leverage its potential to alleviate poverty and foster a compassionate society per Islamic teachings. Emphasizing the importance of Zakat and applying it fairly can drive significant progress in poverty reduction and social development in Islamic countries like Bangladesh. This study seeks to explore innovative approaches to zakat distribution that align with contemporary economic challenges and societal dynamics, ultimately contributing to a more equitable and prosperous future for the people of Bangladesh. As a result, poverty remains an ongoing problem in Islamic countries, and Zakat is a powerful tool to overcome this problem. By revising and improving the zakat distribution practices in Bangladesh, where the principles of Islamic economics guide efforts to reduce poverty and increase social welfare, work can be done toward building a more just and compassionate society.