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Revisiting Socioeconomic Development Hypothesis: Does Zakat Matter for OIC Member Countries?

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Abstract

Zakat, a multidimensional and sustainable institution, wields significant potential for several aspects of a nation’s economy. This study examined, from an empirical point of view, the potential impact of Zakat on economic development with a focus on the OIC member countries. The study employs the pooled OLS regression and fixed effect (as robustness checks) technique for static panels on 50 OIC countries from 1970 to 2020. The finding suggests that Zakat has a positive indirect impact on welfare, human capital development, and shared prosperity on the other hand. These findings enhance the socioeconomic development hypothesis and Zakat nexus in Muslim countries through a virtuous cycle of support to the poorest social categories through stimulating aggregate demand and production. Although the findings of this study hold significant implications for economic growth and development in OIC member states, in particular, the findings also present a new perspective to policymakers and academia who seek to broaden the scope of economic growth and development in other developed and developing countries across the world.

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Data Availability

All data generated or analysed during this study are included in this published article.

Notes

  1. Among these countries, in Pakistan in the late 1980s, obligatory Zakat receipts stood at 0.35% of GDP and Saudi Arabia, between 0.01% and 0.04% of GDP (Kuran, 1993, p. 319).

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Authors and Affiliations

  1. Department of Economics, IIUM, Kuala Lumpur, Malaysia

    Aroua Robbana

  2. Department of Finance, EMAA Business School, Rabat, Morocco

    Abdessamad Raghibi

  3. Department of Religions, University of Ilorin, Ilorin, Nigeria

    AbdulGafar Olawale Fahm

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  1. Aroua Robbana
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  2. Abdessamad Raghibi
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  3. AbdulGafar Olawale Fahm
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Contributions

Fahm: conducted the literature review, designed the research methodology, collected and analyzed the data, and also wrote the first draft of the manuscript; Robbana: contributed to the design of the research methodology, provided guidance on the data analysis and helped revise and edit the manuscript; Raghibi: provided expertise on the topic of zakat and socioeconomic development, contributed to the interpretation of the results And also helped revise and edit the manuscript.

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Correspondence to AbdulGafar Olawale Fahm.

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Highlights

• Purpose of the study: This paper investigates the potential impact of Zakat on a set of macroeconomic variables of OIC member countries.

• Design/methodology/approach: The study employs the pooled OLS regression technique for static panels in OIC countries.

• Data: Macroeconomic indicators from the World bank’s World Development Indicators (WDI) database from 1970 to 2020.

• Findings: Our findings suggest a strong correlation between Zakat and the macroeconomic variables selected for this study. The study shows that Zakat has a significant positive impact on the variables.

• Originality/value of the paper: The value of this paper emerges in quantifying the potential Zakat impact on the dynamics of economic development, i.e. shared prosperity, human capital development, and social welfare and social protection.

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Robbana, A., Raghibi, A. & Fahm, A.O. Revisiting Socioeconomic Development Hypothesis: Does Zakat Matter for OIC Member Countries?. J Knowl Econ (2023). https://doi.org/10.1007/s13132-023-01632-y

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