Zakat and human welfare : an analysis of productive-based zakat in Jakarta, Indonesia

Abstract

This study aims to evaluate the importance of productive-based zakat on the welfare of zakat recipient (mustahiq) in the perspective of human development. The focus area of this study is to estimate the human development index (HDI) at the household level, particularly at the deserving household. The second focus area is to explore whether the human development index status of mustahiq is affected and improved by productive-based zakat. In doing so, two repeated questionnaires were distributed to productive-based zakat beneficiaries who received funding from zakat institutions in Jakarta, Indonesia. The samples were obtained through two-stage cluster sampling, while the methods were employed through a human development index disaggregation approach, t-test and panel data regression. By using two periods of observation, a proposed result of human development index disaggregation at household level has been demonstrated. It is found that the level of human development index of household who receives productive-based zakat is significantly higher than that of the first period. The underlying distribution of household human development index also improves in the second period. Furthermore, by evaluating the detailed results of the human development index components, the education index and income index are found statistically higher in the second period, while the life expectancy index is not that significant. Meanwhile, the results of panel data regression show that the variable of productive-based zakat is positively correlated with the level of human development index. The magnitude of the relation is 0.00000706. This can be interpreted that the household of mustahiq needs about Rp 10,000,000 ($909) of productive-based zakat fund to increase 0.07 point of human development index. Therefore it can be concluded that zakat, particularly productive-based zakat, can play important role to improve the welfare of poor households. However, a significant amount of zakat is required to achieve such positive result