Zakat as a Poverty Alleviation Instrument: A Case Study in Indonesia and Malaysia

Abstract

This study aims to explore the role of zakat as an economic empowerment instrument in addressing social and economic inequalities in Indonesia and Malaysia. These two countries have different zakat management systems, influenced by their social, cultural, and regulatory characteristics. Specifically, this research examines three main aspects: the readiness of zakat institutions' infrastructure in supporting the economic empowerment of the poor, the impact of social and economic disparities on zakat distribution effectiveness, and the influence of cultural and social values on the acceptance and utilization of zakat. The findings show that in Indonesia, despite the legal framework supporting zakat management through BAZNAS (National Zakat Agency) and Zakat Management Organizations (LAZ), zakat collection remains limited, with inadequate infrastructure and imbalanced distribution. Public distrust and operational challenges such as high administrative costs and a lack of transparency hinder the effectiveness of zakat as an empowerment tool. In contrast, Malaysia, with a more centralized zakat system through the State Islamic Religious Councils, shows higher compliance levels and more efficient zakat management, although challenges in equitable distribution still exist. Additionally, cultural and social values play a crucial role in enhancing or inhibiting zakat acceptance. In Indonesia, high levels of religiosity and strong social norms encourage zakat compliance, but poor management practices and lack of transparency reduce public participation. In Malaysia, the integration of zakat with the taxation system provides fiscal incentives, raising awareness and improving compliance. This study recommends the need for reforms in zakat management, alongside improved transparency and communication to enhance public trust, allowing zakat to be more effective in empowering the economy and reducing social inequality.