The Impact of Zakah Transfer on Multidimensional Poverty: The Case of Pakistan

Abstract

Received: 18 February 2019 Accepted: 22 June 2019 Abstract. While Zakāh has a significant effect on reducing income poverty, its impact on multidimensional poverty (deprivation in health, education, and living standard) has not been studied much. Since the size of impact depends on accuracy of Zakāh targeting and its coverage, this paper assesses the accuracy of Zakāh targeting and coverage by computing Multidimensional Poverty Index (MPI) for Last Year’s Zakāh (LYZ) recipients and LYZ non-recipients using Pakistan Social and Living Standard Measurement (PSLM) survey (2014). The impact of LYZ transfer on multidimensional poverty is estimated using Propensity Score Matching (PSM) method to control for confounding factors by comparing treatment (LYZ recipients) and control (LYZ non-recipients) groups. The higher MPI of treated group shows accuracy of targeting. The average-treatment effect (ATE), average-treatment effect on the treated (ATET), and potentialoutcome mean (POM) estimates show small impact of LYZ payment on total weighted and individual deprivations in the short-run. However, the statistical insignificance of ATE and ATET shows insufficient coverage as well as the possibility of reaching out to income-poor, but not to multidimensional-poor. This implies that public Zakāh committees should disburse the Zakāh based on multidimensional poverty status for efficient use of Zakāh funds for the alleviation of multidimensional poverty.