Zakat as an Alternative of Microcredit for Poverty Reduction in Bangladesh

Isahaque Ali et al.


Multidimensional poverty is a current global issue and nationally still exists in Bangladesh. Microfinance is considered one of the most important programs for poverty reduction. The formal and informal financial sectors are ineffective to serve the poorer section of the communities. Zakat is one of the main philosophies of the Islamic finance, centered on societal well-being and equal delivery of assets. Zakat is mandatory for every Muslim who possesses over a prescribed limit of wealth for at least one continuous year 2.5% of one's wealth is given away to the poor. This research was carried out in the district of Bogra, Bangladesh, to examine the difference of household income between the beneficiaries of only microfinance and beneficiaries of both microfinance and zakat recipients. A total of 400 out of 279,000 women beneficiaries of microfinance were recruited as respondents in which cluster sampling method was deployed. The finding indicates that the average daily, monthly, and yearly income of only microfinance beneficiaries was Tk30.56 (US$0.42), Tk897.93 (US$12.48) and Tk9692 (US$134.62). On the other hand, the average daily, monthly and yearly income of both recipients of microfinance and zakat was Tk69.55 (US$0.97), Tk2086.36 (US$28.98) and Tk20845.45 (US$290) respectively. Using the T values (4.12, 4.14 and 3.70), the study result highlights that there is a statistically significance differences of household income with P. value of 0.00 (P<0.05) in between the two groups who benefited from solely microfinance and those who benefited from both microfinance and zakat. The study findings indicate that appropriate utility of zakat was effectual in increasing the household income of microfinance beneficiaries in Bangladesh.


Zakat, Microfinance, Poverty Alleviation, Bangladesh

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