Page 20 - Zakat in Malaysia

ZAKAT IN MALAYSIA

URBAN POVERTY IN FEDERAL

TERRITORY OF MALAYSIA

Urban and rural areas have different poverty phenomena. SIRC and zakat institutions
in Malaysia acknowledges that there is a difference in the cost of living in urban and
rural areas in determining the rate of zakat distribution. This problem is acknowledged
by most academics regarding the importance of adjusting for the cost of living in
urban and rural areas in poverty studies.

Urban and rural poverty are two different phenomena. According to a World
Development Bank report, approximately 56% of the world’s population (4.4 billion
people) live in cities with an estimated seven (7) out of 10 people living in cities.
This situation is expected to continue and it is estimated that by 2050, the number
of urban residents will double. If seen in terms of percentage, poverty in the city has
less amount compared to rural areas. However, the impact of poverty in cities is more
felt than in rural areas. A person who lives in the city lives in a stone house, has a car
or motorcycle, earns more than the poverty line income (PLI) but they have a large
number of dependents, high cost of living especially house rent, transportation and
various expenses for basic needs and services.

In addition, there are many differences between household expenditure patterns and
poverty patterns between urban and rural areas. In urban areas, the percentage of
urban community household expenditure is more focused on non-food items such
as housing, transport and education. This is in contrast to spending patterns in rural
areas which are heavily focused on food spending. For this group, non-food items
are only obtained after food needs are met and there is an excess of food expenses.
In addition, the pattern of poverty in cities often involves debt either with banks or
financial institutions, while in rural areas, their poverty does not involve debt.
Therefore, the current situation in the Federal Territories is that zakat distribution is
still not able to meet the needs of the asnaf fakir and the urban poverty, especially if
the amount of zakat collection is decreasing. The situation of corporate companies
or people who do not pay zakat in PPZ-MAIWP will have a big impact on the amount
of zakat collection and distribution in the Federal Territories because despite the fact
that they have recorded high collections, but due to the urban poverty’s kifayah limit
rate is also high, then the ratio collection and distribution will be unbalanced. It is
possible that in the future this zakat institution will no longer be sustainable and if it
continues, it will have a large negative impact especially on the distribution of asnaf
in bulk.

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