Rethinking the role of zakat in poverty eradication | Lonik | Proceedings of AICS - Social Sciences 6423 13475 1 SM

Proceedings of The 3rd Annual International Conference Syiah Kuala University (AIC Unsyiah) 2013
In conjunction with The 2nd International Conference on Multidisciplinary Research (ICMR) 2013
October 2-4, 2013, Banda Aceh, Indonesia

RETHINKING THE ROLE OF ZAKAT IN POVERTY ERADICATION
KU ‘AZAM TUAN LONIK AND NOR SYAFINAS MUDA
School of Distance Education, Universiti Sains Malaysia, 11800, Penang, Malaysia.
Corresponding author: kuadzam@usm.my

ABSTRACT
Malaysia has done very well in eradicating the problem of poverty in the country. The
poverty rate has fallen from 49.3 percent in 1970 to 3.9 percent in 2009. Nonetheless, one main
facet of such phenomenon remains, i.e. the majority of the poor are from the Malay-Muslim
community. In Malaysia, the management of zakat is under the state jurisdiction. As such the
collection and disbursement of the zakat funds also falls under the purview of the Majlis Agama
Islam Negeri. Each of the Majlis Agama Islam Negeri has its own zakat collection body. Two
issues emerged. First, while zakat should be able to free the recipient from poverty, yet, the
proportion of money allocated for these groups of asnaf is very minimal such that it fails to
uplift the economic well-being of the recipients. Second, current practices adopted by most
zakat agency are to give cash money to the recipients which failed to motivate them to embark
on productive activities to uplift their economic well-beings. This paper evaluate the attempt

made to provide start-up capital for the poor to engage in business activities using the zakat
fund in the hope that the success of the initiatives will see a reduction in the incidence of
poverty among the muslim communities and to ensure that the money disbursed to the poor
and the needy are used not for consumptive purpose but for productive activities.
Keywords: zakah, poverty, poor and needy.

Introduction
Being one of the pillars of Islam shows how important Zakat is in the life of a Muslim.
The zakat that was prescribed upon Muslim has two main features. First, the zakat was imposed
on income and specifically identified properties. Secondly, the Quran also specifically
prescribed the eight groups of people entitled to receive the zakat payout (asnaf).
Zakat are paid by the haves among the society to the haves-not. Together with sadaqah,
it serves as an embodiment of the functionality of the social welfare functions of an Islamic
society. While in certain society, Malaysia for example, the payment and disbursement of zakat
is carried out by a legal body, the same cannot be said of other parts of the world. The
functioning of these bodies acts only to facilitate the collection and disbursement of the zakat.
Nonetheless, the nas (al-Quran and al-Hadith) recognised the existence of these bodies.
According to the nas, one of the categories of people entitles to receive the zakat money is the
amil – someone responsible for collecting the zakat fund.
In Malaysia, the management of zakat comes under purview of the state jurisdiction

through the Majlis Agama Islam Negeri (MAIN). For the purpose of zakat management, each
MAIN has its own arm that deals with collecting and disbursing the zakat fund. Two pertinent
issues in zakat management in Malaysia emerged. First, while zakat should be able to free the
recipient from poverty, yet, the proportion of money allocated for these groups of asnaf is very
minimal such that it fails to uplift the economic well-being of the recipients. Second, current
practices adopted by most zakat agency are to give cash money to the recipients which failed
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Proceedings of The 3rd Annual International Conference Syiah Kuala University (AIC Unsyiah) 2013
In conjunction with The 2nd International Conference on Multidisciplinary Research (ICMR) 2013
October 2-4, 2013, Banda Aceh, Indonesia

to motivate them to embark on productive activities to uplift their economic well-beings.
Realising this, in recent years, some of these bodies have devised a new mechanism in
disbursing the zakat fund especially for the poor and the needy (al-fakir wa al-masakin). This
new mechanism exists in the form of start-up capital to help the zakat recipients setting up a
business endeavour. The initiative has enables the recipients to stand by their own feet thus
reducing their dependence on the zakat fund.
This paper evaluates the attempt undertaken by the Jabatan Zakat Negeri Kedah
(Kedah State Zakat Department) in managing the start-up fund known as the Bantuan Jayadiri

to provide start-up capital for the poor to engage in business activities using the zakat fund in
the hope that the success of the initiatives will see a reduction in the incidence of poverty among
the muslim communities and to ensure that the money disbursed to the poor and the needy are
used not for consumptive purpose but for productive activities.
The Economic of Zakat
Various verse in the Qur’an emphasised the need for Muslim to pay zakat. For example,
in Surah Al-Baqarah, verse 83, Allah says

And remember we took a Covenant from the Children of Israel (to This effect):
worship none but Allah treat with kindness your parents and kindred, and orphans and
those in need; speak fair to the people; be steadfast in prayer; and practise regular
charity then did ye turn back, except a few among you, and ye backslide (even now).
Except for zakat al fitr, many Muslim economists have argued that from the economic
points of view, zakat acts as a form of an automatic stabiliser and a counter-cyclical policy
instrument (see for example, Sadeq, 1990). As with other income based tax system, and
conforming to the mechanism of an automatic stabiliser and a counter-cyclical policy
instrument, the revenue collected from zakat fluctuates from time to time. This fluctuation is
based on the fiscal cycles of a country. This also highlights the beauty of zakat being imposed
as a percentage of income or wealth, or in the case of livestock, it was imposed based on the
number of livestock in possession.

The collection and disbursement of Zakat transfer wealth from the haves to the havesnot (Siddiqi, 1980). The haves may not necessarily be the surplus sector in literal meaning, for
the payment of zakat is based on the minimum amount owned by a Muslim (the nisab) and the
minimum time period in which a Muslim owned the income or wealth (the haul).
Apart from being a counter-cyclical policy instrument, zakat also acts as a build-in
safety net akin to a social welfare programs in a society. It provides financial protection to the
haves-not. Zakat should increase the level of disposable income of the zakat recipients (Kahf,
1980) as well as providing a humane standard of living for them (Chapra, 1980).
This prompted Faridi (1980) to argue that, zakat should serves two main objectives,
that is, (a) to ensure minimum means of livelihood to each and every individual in the
community and, (b) to ensure productive use of economic resources for the material well-being
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Proceedings of The 3rd Annual International Conference Syiah Kuala University (AIC Unsyiah) 2013
In conjunction with The 2nd International Conference on Multidisciplinary Research (ICMR) 2013
October 2-4, 2013, Banda Aceh, Indonesia

of the community.

What Allah has bestowed on His Messenger (and taken away) from the people
of the townships,- belongs to Allah,- to His Messenger and to kindred and orphans, the

needy and the wayfarer; In order that it may not (merely) make a circuit between the
wealthy among you. So take what the Messenger assigns to you, and deny yourselves
that which He withholds from you and fear Allah, for Allah is strict in punishment.
Taking the two objectives of zakat as highlighted by Faridi (1980) above into account,
one can adduced that this two groups of people should take precedent above the other. In fact,
as argued by Chapra (1992), needs fulfilment of the poor is the most important aspect of zakat
payment, to enable them to stand on their own feet.
Apart from that, although, the list of zakat beneficiaries does not necessarily means the
priority assigned to certain group or groups, however, the Qur’an constantly emphasised the
destitute and the poor (fakir wa al masakin). In the following ayah in Surah al_Baqarah, verse
110, the commands to Muslim to be good to the poor are placed and emphasised together with
being good to the parents, kindred and the orphans.

And be steadfast In prayer and regular In charity: and whatever good ye send
forth for your souls before you, ye shall find it with Allah for Allah sees well all that ye
do.
Apart from the poor and needy, the Quran has list down six other categories of people
entitled for the zakat fund. This is specified in Surah at-Taubah, verse 60:

Alms are for the poor and the needy, and those employed to administer the

(funds); for those whose hearts have been (recently) reconciled (to Truth); for those In
bondage and In debt; In the cause of Allah, and for the wayfarer: (thus is it) ordained
by Allah, and Allah is full of knowledge and wisdom.
They are: al-Fuqara’ (destitute), al-Masakin (the poor), amil (the collector), muallaf
(new convert/revert), riqab (slaves), gharimin (someone is heavy debts), fisabilill (striving in

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Proceedings of The 3rd Annual International Conference Syiah Kuala University (AIC Unsyiah) 2013
In conjunction with The 2nd International Conference on Multidisciplinary Research (ICMR) 2013
October 2-4, 2013, Banda Aceh, Indonesia

the way of Allah) and ibnu sabil (wayfarer who runs out of resources).
Methodology
Poverty remains one of the problems in Malaysia. The Economic Planning Unit
estimated that despite the reduction in the incidence of poverty throughout Malaysia, the
incidence of poverty in a few states remain high. One of the states is Kedah which recorded a
5.3% poverty rate. Although there is no data to identify the specific percentage of Muslim in
the category of poor, but being a predominantly Malay society, it can be deduced that the
majority of those are the Malay-Muslim community.

This study attempts to evaluate the success of the program Bantuan Jayadiri introduced
by the Jabatan Zakat Negeri Kedah (Kedah State Zakat Department) which provide start-up
fund for the poor to venture into a business activity. The program was introduced in 2008.
Within the period January 2009 until April 2011 a total of 215 recipients received the financial
assistance under this program. However, only 180 recipients were involved in this study. This
constitutes 83.72% of the total recipients. For some reasons, the remaining 35 recipients cannot
be reached.
This study adopted a face-to-face interview with 180 recipients of the Bantuan Jayadiri.
They are the recipients of the Bantuan Jayadiri for the year 2009 and 2010. The lists of
recipients were provided by the Jabatan Zakat Negeri Kedah.
Results and Discussion
A.
Background Information
Of the total 180 recipients of the Bantuan Jayadiri in 2010 and 2011, 82 (45.6%) are
male and 98 (54.4%) are female – Table 1.
Sex
Male
Female
Total

Table 1: Sex of resipient
Frequency
82
98
180

Percentage
45.6
54.4
100

As shown in Table 2, 5% (9 recipients) aged between 20-30 years old; 23.3% (42
recipients) aged between 31-40 years old; 42.2% (76 recipients) aged between 41-50 years old;
22.8% (41 recipients) aged between 51-60 years old; and 6.7% (12 recipients) aged over 60
years old.
Table 2: Age of recipient
Age
20 – 30 years
31 – 40 years
41 – 50 years

51 – 60 years
> 60 years
Total

Frequency
9
42
76
41
12
180

Percentage
5.0
23.3
42.2
22.8
6.7
100

Majority of the recipients are married (79.4% or 143 recipients). 16.1% (29 recipients)
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Proceedings of The 3rd Annual International Conference Syiah Kuala University (AIC Unsyiah) 2013
In conjunction with The 2nd International Conference on Multidisciplinary Research (ICMR) 2013
October 2-4, 2013, Banda Aceh, Indonesia

are widow, 6 recipients are single and 2 are widower.

Marital status
Single
Married
Widow
Widower
Total

Table 3: Marital Status
Frequency
6
143

29
2
180

Percentage
3.3
79.4
16.1
1.1
100

B.

The Financial Assistance
79 recipients received financial assistance in the form of cash money as a start-up
capital to start a business venture while 101 received the assistance in the form of tools.

Cash money
Tools
Total

Table 4: Types of Assistance
Frequency
79
101
180

Percentage
43.9
56.1
100

The amount of assistance varies in the rage of RM500 – RM5,000. 12 recipients (6.7%)
received between RM500-RM1,000; 91 recipients (50.6%) received between RM1,001RM2,000; 67 recipients (37.2%) received between RM2,001-RM3,000, 7 recipients (3.9%)
received between RM3,001-RM4,000 and finally only 3 recipients (1.7%) received between
RM4000-RM5000. The later are fishermen and the assistance was in the form of a boat engine.

Amount (RM)
500 – 1000
1001 – 2000
2001 – 3000
3001 – 4000
4001 – 5000
Total

Table 5: Amount of Assitance
Frequency
12
91
67
7
3
180

Percentage
6.7
50.6
37.2
3.9
1.7
100

Table 6 provide the types of business ventures undertaken by the recipients. The highest
are in sewing/tailoring (25%) followed by selling food stuff (24.4%) and operating food stall

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Proceedings of The 3rd Annual International Conference Syiah Kuala University (AIC Unsyiah) 2013
In conjunction with The 2nd International Conference on Multidisciplinary Research (ICMR) 2013
October 2-4, 2013, Banda Aceh, Indonesia

(11.1%)
Table 6: Types of Business Ventures
Frequency
Sewing/tailoring
45
Retail
3
Selling Food stuff
44
Food stall
20
Traditional Food Production
15
Traditional Medicines
2
Carpentary
5
Construction
3
Agri-business
6
Fishery
7
Others
30
Total
180

Percentage
25.0
1.7
24.4
11.1
8.3
1.1
2.8
1.7
3.3
3.9
16.7
100

C.

Changes in Income
Before receiving the financial assistance from Bantuan Jayadiri, 49.4% (89 recepients)
have an income of RM430 or below per month which fall under the category of absolute
poverty. In addition, 31.7% (57 recipients) has an income between RM421-RM720. The
remaining 18.9% (34 recipients) has an income of RM721 an above even before receiving the
Bantuan Jayadiri. The poverty line income used to measure the incidence of poverty in
Malaysia is RM720 per month.
Table 7. Income before and after
Before
After
Frequenc Percentage Frequency Percentage
y
Below RM 430
89
49.4
30
16.7
RM 431 – RM
57
31.7
74
41.1
720
34
18.9
76
42.2
RM 721 and
above
Total
180
100.0
180
100.0
Mean
540.2833
775.4000
Median
499.0000
720.0000
Mode
400.00
499.00
Standard
282.55392
303.88894
Deviation

Changes
(no. of
recipients)
-59
+17
+42

43.52%

However, after receiving the Bantuan Jayadiri, only 30 recipients (16.7%) falls under
the absolute poverty category while 74 recipients (41.1%) have an income of between RM421RM720. The number of recipients above the poverty line income has almost doubled from 34
to 76. In other words, 42.2% of the recipients has managed to escape the poverty trap as a result
of the Bantuan Jayadiri compared to 18.9% before the Bantuan Jayadiri.
The mean income of the group has increased from RM540.28 before receiving the
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Proceedings of The 3rd Annual International Conference Syiah Kuala University (AIC Unsyiah) 2013
In conjunction with The 2nd International Conference on Multidisciplinary Research (ICMR) 2013
October 2-4, 2013, Banda Aceh, Indonesia

Bantuan Jayadiri to RM775.40 after the receiving the bantuan Jayadiri – an increase of 43.5%.
D.

Relationship between Changes in Income and Types of Business Ventures
Table 8 shows the relationship between the changes in income and the types of business
ventures undertaken by the recipients of Bantuan Jayadiri. In total, 122 recipients (67.8%) of
Bantuan Jayadiri experienced an increased in income while 58 recipients (32.2%) does not
experienced an increase in income. On occupational basis, all recipients venturing in
construction had experienced an increased in income, 83.3% of those in agro-business, 82.2%
of those venturing in sewing/tailoring, 66.7% percent of those in retail, 59.1% in selling food
stuff. Sadly, all recipients venturing into producing traditional medicines does not experienced
changes in income.
Table 8. Relationship between Changes in Income and Types of Business Ventures
Types of business ventures
Tradional Traditional Carpentary
Food
Medicine
(%)
Production
(%)
(%)
Yes
37
2
26
11
9
0
4
(82.2) (66.7) (59.1) (55.0)
(60.0)
(0.0)
(80.0)
No
8
1
18
9
6
2
1
(17.8) (33.3) (40.9) (45.0)
(40.0)
(100.0)
(20.0)
Total
45
3
44
20
15
2
5
(100.0) (100.0) (100.0) (100.0) (100.0)
(100.0)
(100.0)
Sewing Retail
(%)
(%)

Food
stuff
(%)

Food
stall
(%)

Cons- Agro- Fishery Others
tructin business (%)
(%)
(%)
(%)

Total
(%)

3
5
5
20
122
(100.0) (83.3) (71.4) (66.7) (67.8)
0
1
2
10
58
(0.0)
(16.7) (28.6) (33.3) (32.2)
3
6
7
30
180
(100.0) (100.0) (100.0) (100.0) (100.0)

Conclusions
While the nas specifically identified the people entitled for the zakat disbursement, it
says nothing about the method of disbursement. Initiatives undertaken by a few zakat collection
agencies in Malaysia in providing a start-up fund to help the poor and needy to venture into
business activities should be welcomed. As shown in this study, the Bantuan Jayadiri as a form
of business start-up capital to help the poor set up business ventures has succeeded in a)
increase the income of the poor, and, b) alleviate the poor out of the poverty trap. This should
become a model in poverty eradication programs throughout the Muslim world.
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In conjunction with The 2nd International Conference on Multidisciplinary Research (ICMR) 2013
October 2-4, 2013, Banda Aceh, Indonesia

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