Page 16 - Zakat & Waqf: Impact on Women and Community Development

6 | Zakat & Waqf: Impact on Women and Community Development
© Zakat & Waqf: Impact on Women and Community Development
ISBN 978-967-####-##-#

Zakat is a wealth distribution from the rich to the needy. Compared to
the wealthy, the impoverished have a larger propensity to consume.
Therefore, the Zakat institution has the potential to increase overall
demand, which could lead to inflation (Masroom, M.N., Yunus,
W.M.A. and Huda, M, 2020).

Additionally, some Muslim economists contend that in an Islamic
economy, zakat will have two impacts on overall consumer spending.
First, compared to a non-Islamic economy without a comparable fiscal
measure, both the average and marginal propensities to consume
would be higher in an Islamic economy (Bin-Nashwan et.all, 2020).
Second, an Islamic economy would have a lower investment difference
at every income level. Other Muslim economists, however, contend
that a variety of factors, in addition to the transfer of purchasing power
to the underprivileged through the Zakat, which tends to lessen
income and wealth inequality, impact the consumption patterns of
society.

Increase Employment and Income in the Economy
According to some Muslim economists, a specific amount of Zakat
funds invested in line with an economy's overall production priorities
will help the poor and the economy by having a multiplier effect on
employment and earnings instead of always giving the same group of
individuals financial assistance, this would progressively end poverty.
The economy's employment and income levels would rise, boosting
people's standards of living and eventually raising the total amount of
zakat collected (Beik, I.S. and Pratama, C, 2017).

The institution of zakat contributes significantly to the alleviation of
another major economic problem such as employment. By establishing
various institutions, centres, facilities, and others, it creates direct and

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