The role of zakat in poverty alleviation and income inequality reduction : a case study of West Java, Indonesia

Abstract

This dissertation aims to analyse the role of zakat distribution programmes in eradicating poverty from the material and spiritual dimensions. Zakat is also expected to reduce income inequality among groups in urban and rural areas. The research takes the case study of 1,300 zakat beneficiaries managed by the National Zakat Board of Indonesia (BAZNAS) in five different areas in West Java Province, namely Bogor City, Bogor Regency, Depok City, Sukabumi City and Sukabumi Regency. BAZNAS acts as the coordinating institution of zakat in Indonesia. The study uses a modification of the Centre of Islamic Business and Economics Studies (CIBEST) model that assesses poverty from both the material and spiritual dimensions. In addition, the Deciles method, Gini coefficient and Atkinson index are also employed to measure the effect of zakat on income inequality reduction among the zakat beneficiaries under consideration. Based on the CIBEST model and income inequality measures, this study suggests that the present zakat distribution programmes can help alleviating poverty and reduce income inequality among the zakat beneficiaries in urban and rural areas. This study is expected to demonstrate how zakat can contribute to the overall development of the country. A number of policy recommendations are made for the government to optimise the role of zakat on economic development not only from the material perspective but also from the spiritual point of view.