Evaluating the effectiveness of zakat distribution and provincial zakat policy in alleviating poverty : a panel data analysis across provinces in Indonesia

Abstract

Zakat as the one of the core pillars of Islam, holds not only religious obligations but also serves as an important social and economic instrument in addressing poverty within Muslim societies. In Indonesia, the management of zakat is regulated through Law No. 23 of 2011 which provides a national framework for the collection, distribution, and institutional governance of zakat. As a derivative of this national law, many provincial governments have issued local regulations and policies to implement and manage zakat performance within their respective regions. However, the effectiveness of these provincial zakat policies in achieving a social objective of zakat to alleviate poverty has not yet been empirically evaluated. Thus, this study aims to evaluate the effectiveness of zakat distribution and the presence of zakat policy in reducing poverty at the provincial level in Indonesia. Utilizing panel data from 34 provinces between 2018 until 2024 and applying the Generalized Method of Moments (GMM) estimation technique, this research also controls for macroeconomics factors such as Gross Domestic Product (GDP), Unemployment Rate, and Human Development Index (HDI). The results shows that the presence of provincial zakat policies is associated with lower poverty when considering the presence of control variables. In contrast, zakat distribution performance was found to have a positive association with poverty rates, highlighting a counterintuitive result driven by the economic disruption of the covid-19 pandemic crisis and the financial behaviour of zakat recipients. This study provides a practical recommendations for policymakers and zakat management institutions to maximize the utilization of regional regulation in order to optimize the role of zakat in poverty alleviation.