Eradication of Poverty through Existing Zakat System in Pakistan: An ARDL Modelling Approach to Co-integration

Abstract

Study explore the inter relationships between zakat and poverty in Islamic view point during the span of 1981 to 2014. In this paper an ARDL technique (Bound testing approach) recommended by Pesaran et al. (2001) is employed to examine the short-run dynamics and long-run impact of zakat, inflation, population and child labour force on poverty. Our study showed that there is negative relationship between poverty and Zakat. Poverty in the long run can be reduced by the proper implementation of Zakat system. Moreover, procedure of unit root test also ensures that there is long run relationship in our study. By Islamic point of view zakat bears the tendency to reduce the poverty.  Recent study of economists’ also believes, similar to our finding, that poverty can be reduced by proper Zakat system.