Distribution of Productive Zakat for Reducing Urban Poverty in Indonesia

Productive zakat is a strategic mechanism to help alleviate poverty. This study aims to explore the mechanism by which BAZNAS manages productive zakat in an attempt to help alleviate poverty in Indonesia. This study uses a qualitative exploratory approach. Documentary data pertaining to zakat distribution to mustahīq in the urban poor Surabaya was collected from the East Java BAZNAS office. Several interviews with the leaders of this office were also conducted to capture their views on the management of productive zakat. The results showed that to reduce the poverty of the urban poor, the BAZNAS applies a strategic distribution of productive zakat implemented through (1) a revolving capital loan to increase venture capital of the mustahīq members of MSMEs run under the qarḑ al-ḫasan contract, and (2) providing work equipment for starting or developing businesses. These mechanisms were effective in helping the poor for starting and expanding their business, hereby improving their wellbeing. It is suggested that amil zakat may increase the allocation of zakat distribution for productive purposes, rather than for one stop consumption. This study expands the understanding of the currently developed approach to zakat management and provides sound good practices in reducing poverty.