THE IMPACT OF ZAKAT ON POVERTY ALLEVIATION IN PAKISTAN: AN ISLAMIC JURISPRUDENCE PERSPECTIVE

Abstract

The funds raised under Zakat as one of the five religious pillars of Islam is a mandatory socio-economic weapon of wealth redistribution, social justice and poverty reduction in Islamic jurisprudence (fiqh). The available literature reveals that there exists an inverse relationship between Zakat disbursement and income poverty and multidimensional poverty, but the effects are small because it is affected by the issues of governance, limited asset coverage, low transparency and mostly consumptive disbursement.  The paper points to the lack of linkage between the rich fiqh potential of Zakat as an agent of transformation through rights based approach and its poor performance in Pakistan where it is fragmented, there is lack of trust and ineffective utilization is preventing sustainable alleviation of poverty in Pakistan. The purpose of this proposed study is to explore the role of Zakat in reducing poverty through the prism of Islamic jurisprudence, evaluate existing institutional frameworks, and institutional constraints, and come up with Shariah-conformable reforms. The conceptual model places the dependent variable (poverty alleviation) that is measured by the neck count poverty ratio and Multidimensional Poverty Index as a result of Zakat disbursement (primary independent variable), and Zakat governance and transparency, the productive use of Zakat funds and Zakat collection coverage/efficiency as put forward variables. The normative underpinning is provided by Maqasid al Shariah theory where justice, general interest of the populace and long-term self-reliance are emphasized. The proposed techniques to be used in the analysis include ARDL, multilevel regression, propensity score matching and Structural Equation Modeling. To sum it up, to make Zakat more effective, it is necessary to transition to productive ownership schemes, technology-facilitated transparency, increase the coverage of assets through and with Public-Private Partnerships. It has been recommended to include provincial law changes, online tracking, education about the rules of fiqh, and added to national social protection systems. Future opportunities include longitudinal research on the cohort effects of MPI, provincial analyses of experimental evaluations of productive Zakat pilots, and combining Waqf to blend productive social finance solutions in an Islamic context. The study will be beneficial to Islamic economics literature and help SDG 1 (No Poverty) unlock the transformative potential of Zakat in Pakistan.