Zuhaib Ali

Assessment of Zakat as a Tool for Islamic Microfinance A Thesis Submitted By Muzamil Mustafa (18S-MBA-BS-23) In partial fulfillment of the requirement for the degree of Master of Business Administration Supervised by Dr. Shah Muhammad Kamran Co-Supervised by Dr. Adnan Pitafi Mehran University Institute of Science, Technology and Development Master’s Research Proposal Writing Rules Postgraduate Research Proposal is a proposed reflection of postgraduate students research work achieved; behalf of postgraduate students study level, as well as the main basis of application and grant of Master’s degree. In order to improve the quality of postgraduate students writing quality and standardize the content and format of postgraduate research proposal, this document is a sample template for the “Mehran University Institute of Science, Technology and Development” as a reference for postgraduate degree application. Throughout the APA style of Referencing will be adopted as a standard for insert citations as well as reference list. Ethics Statement All participants will be given information and open to consent to participate in the study as per HEC guidelines. Consent will be obtained from guardians of participants whose age is less than 18 years. Furthermore, I __________________ master research student declare that the research proposal I am submitting is in no way an already published/unpublished research study and nor is it copied from any sort of project report. I hereby declare that the research study its aim, objectives and scope is my genuine idea with the consent of my supervisor. 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I further attest that I have studied and understand the Higher Education Commission of Pakistan Plagiarism available on its link below: Link: http://www.hec.gov.pk/english/services/faculty/Plagiarism/Pages/default.aspx Table of Contents 1Introduction1 1.1Background1 1.2Muslim Countries and Poverty1 1.3Causes of Poverty2 1.4Poverty Alleviation Strategies3 1.5Entrepreneurship Development4 1.6Islam, Zakat and Poverty Alleviation5 1.7Zakat mobilization to alleviate poverty through developing small business entrepreneurship5 1.8Zakat as a Method of Creating Entrepreneurs6 1.9Research Questions7 2Literature Review8 2.1Existing Literature8 3Research Methodology12 3.1Data Analysis12 3.2Model Discussion12 3.3Collection of Zakat13 3.4Selection of Prospective Poor14 3.5Skill Development14 3.6Establishment of Business Enterprises14 4Discussion15 4.1Limitations and Future Research15 4.2Assessment15 5Conclusion and Policy Making16 Chapter 1 1 Introduction 1.1 Background According to World Bank figure that about 3 billion people are still surviving below the poverty line under the level of income of 1.25 US$ a day because of the current worldwide economic crises and moderate monetary development rates ( Ali and Hatta 2014). In this manner, poverty has gotten one of the serious issues for some developing economies like Pakistan. Without a doubt, poverty is considered as a serious sickness in any nation (affandi and Astuti 2013). Poverty is unbidden in all economies as well as in the Islamic economy system. It is one of the major reason that is affecting economies of the developing countries which are suffering from inequality of income and the poverty, Pakistan is one of them. Many organizations are working hard to eliminate poverty specially UN, World Bank, Asian Development Bank, NGOs, and other Social Development Organization with different instruments, policies, programs, services and activities. According to the Economic Survey of Pakistan (2017-18) the percentage of peoples who are below poverty line are 24.3%, percentage in rural areas is 30.7 and in urban 12.5 (PCP. 2016). Kasali, et al., (2015) addresses that to face this unwelcomed problem many sectors are working for financial Inclusion to provide financial services to the poor who have not enough access in order to climbing out from poverty, Microfinance is one of them which is playing a key role for the economic development. There are numerous kinds of poverty, alike extreme poverty and relative poverty. Extreme poverty (Absolute poverty) states to the hardship of fundamental needs, which usually contains health care facilities, food, housing, education, wand water. Relative poverty is characterized relevantly as monetary imbalance in the area of society in which individuals live. In reality, relative poverty occurs as long as there is imbalance in income and inequality in distribution of wealth. There exist an excuse that older, kids and disabled essentially contribute to the reason for unemployment and destitution. However, the study asserts a moving concentration from this traditional economic perspective to the religious and social responsibility viewpoint where Zakat as an Islamic religious institution can be sustainable path to alleviate poverty. The study contends that if zakat is dispersed as investment purpose (Seed Money) inside the entrepreneurial structure, adequately capable for easing poverty in Muslim society also somewhere else. Numerous studies defined seed money as pre investment expenses, venture or start-up financing (Lucking 2002; Seelos 2005) and the current study conceive seed money as the sum used up for investment purpose. 1.2 Muslim Countries and Poverty Today in spite of having 40% natural resources and 70% world vitality resources (Laghari, 2013), expanding Muslim populace from 1.6 B in 2010 to 2.2 B by 2030 (Pew Research Centre 2014), with vital geographical area most of the world’s poorest are Muslim nations (Hoque et al 2013). At present worldwide 44% of 1.7 Billion poor are living in Muslim nations and just 8% of GDP is delivered by Muslims nations (World Bank 2010; The Nation 2011), whereas, just negligible whole of 0.81% of GDP is spent on innovative, development and research ( The Express Tribune, 15th June 2013). Be that as it may, Muslims can lessen poverty situation forever in a dramatic manner by creating enterprise by mobilizing their zakat fund in a wise and purposeful way and in this way can expand GDP. Truth be told, Islam as a belief of brotherhood and fellowship wish to make certain social and economic equity for generally all individual and Muslims in particular (Choudhery 2002). But, Islamic instructing of fellowship and social equity would not be significant except if joined by economic justice so everybody gets his due for his commitment to society. To seriously realize social equity, along these lines, all the assets at the disposal of individual must be used productively and equitably to satisfy the requirements of all and to realize a fair distribution of wealth (Sadeq 1996). Thus, Islam underlines distributive equity and integrates in its push to encourage brotherhood, among Muslims by gathering and distribution zakat and upholding Islamic teachings identified with law of inheritance to quicken distribution of wealth and income in the Islamic Community (Dogarwa 2008). 1.3 Causes of Poverty A nation is not poor in account of the absence of resources; among others it needs adequate number of good business entrepreneurs (Hoque et al 2014). In the most recent decade, there has been rising attention in entrepreneurship as an instrument for mitigate poverty across worldwide limits (Murphy and Coombes 2009). It is not new that Enterprise can help to reduce poverty, log before it was presumed that entrepreneurial movement promote financial development (Schumpeter 1934) as vice versa. As indicated by Sadri (2010) business is both cause and outcome of financial development. Indeed, poverty doesn’t rely upon resource grants, monetary and social approaches, populace size, yet in addition on the kinds of financial exercises that are being incorporated (Dogarawa 2009). Exact studies uncovered that the issues faced by Muslim nations are chronic absolute poverty, disparity of income distribution, expanding imbalance of living standard, unemployment, less ideal satisfaction of education and health service, low degree of profitability in primary sector, declining in balance of payments and the most extreme is the foreign debt and failing of the institutional structure and arrangement of customs and values are progressively blurred because of external influences (Affandi and Astuti 2013). Without a doubt, poverty in the Muslim society is the result of numerous variables out of which absence of effective policies and procedures to create entrepreneurship is one of the key elements (Hoque et al. 2014) Furthermore, because of inappropriate distribution of the assets, poverty remains high in the world. Truth be told, the resources of the world are adequate to satisfy the needs of the all, surprisingly however resources of the world are not adequate even to satisfy the greed of a single individual (Gandhi 2013) as showed in fig 1. Allah has made adequate resources for his Creatures. Allah Pak says: It is Allah who made the earth and sky, and referred from paradise water wherewith He delivered organic products to be your food, and He exposed to you the ocean at His order; and He exposed to you the streams/rivers and He exposed to you the sun and the moon steady upon their courses, and He exposed to you the night and day, and provided all that you requested him. If you check Allah’s favouring you’ll not ever count it; most likely man is corrupt, sinful and unthankful. (Quran, 14: 32–34) Quran address in other verse Allah says: “Indeed, The ruler give provision to whom He wills and restricts it, He is ever, concerning His creature. Quran 17:30). Allah says: But look for reward and the means of what Allah has granted you for future abode, but do not neglect your share of this world. And be good to others as Allah has been good to you, and do not seek to spread corruption in the world, surely Allah does not love mischief-makers (those who commit great crimes and sins, corrupts) (Quran 28:77) Despite the fact Allah has made adequate assets still there is poverty and the major reason is that a couple of greedy persons own dominant part of resources. The word greed seems multiple times in the holy Quran. The greedy have more hunger for assets. Allah Pak Says: “The desire for ever-more worldly increase and to exceed to other expectations in such manner keeps you involved and which proceeds until you arrive at your raves” (Quran. 102:1-2). The Messenger of Allah (SAW) says “Watch out for greedy on the grounds that the individual before you died from it. Greedy drove them to be stingy so they become penny pincher” Greed move them to breakdown the ties (of family relationship) so they broke it. Greed push them to sins so they submitted sins. Ibn-e-Abbas portrayed that “Prophet said” if the child of Adam (the individual) had two mountains of wealth, he would want for a third, nothing can fill the wishes of son of Adam exception dust, and Allah excuses him who apologizes to Him” (Bukhari). Most likely, if all rich peoples play their successful and effective part in evacuating poverty, inside limited ability to focus time the word neediness would be no more on planet. 1.4 Poverty Alleviation Strategies There are numerous anti-poverty techniques which can be comprehensively arranged into two major approaches (i) indirect approach: that frame a macro-economic structure to make sure sustainable development, higher per capita and employment, ultimately decrease poverty, and (ii) direct approach: that aim to choose poor population and gives them financial assistance to get access in financial activities, improve wellbeing conditions, credit access, increase education rate and eventually remove poverty (Hassan 2006). Some of the countries like Thailand, Malaysia, and Indonesia are genuine examples of nations that have reduced poverty through indirect approach. These nations followed predictable macroeconomics arrangements that ensure development of six percent or more prominent and expanded open spending on wellbeing, family planning, education and training, health etc. and so on for quite a long time. Interestingly, Pakistan is a case of direct approach where government and non-government associations give a lot of services for the focused group of poor people like providing financial services, access to credit, social insurance and health care to poor individual. Be that as it may, still critical degree of poverty exist in Pakistan which can be diminished by growing small Business entrepreneurial skill with the assistance of zakat mobilization. 1.5 Entrepreneurship Development Enterprise is the dynamic procedure of making an incentive to accomplish quick, beneficial development (Macmillan 1988) to increase business opportunities and business achievement (Schumpeter 1934). It is the ability and creativity by which individuals step up initiative to engage with profitable activity for accomplishing their goals (Chowdhury 2008).Then again, entrepreneur is that individual who has capacity and skill to begin and enterprise either for manufacturing products or providing services for earning profit. Entrepreneurship is one of factor of production (Glancy and McQuaid 2000), motor of financial development (Azim 20111), because monetary growth of a nation is quickened by the exercise of qualified business entrepreneurs, (Matlay 2005). Islam et al (2011) originate that business entrepreneurship’s qualities altogether influence on the business accomplishment of SMEs. For sure, because of numerous variables, adequate quantities of small, medium and large business enterprises are not being created and overseen in the Muslim nations however absence of business expertise and seed money for forming enterprises are the fundamental components for which poverty is seen among the huge number of individuals of Muslims, however, Muslims nations have gigantic regular resources. But Islam as a total and complete means of lifestyle (Quran 5:3) exceptionally empowers the progress of business, industry, trade and agriculture (Hoque et al. 2014), because, assets/resources are activated and expanded for satisfying the requirements of individuals through business(Ariff 1991) and entrepreneurship is created and appropriately managed by business entrepreneurs. Along these lines, for creating business initiatives, innovative skills as it should be developed correctly. The Almighty Allah says “Business is legitimate for you” (Quran 2:275). Chapra (2008) pronounced that ‘need fulfilment’ of all is most extreme significance in Islamic state. Prophet Muhammad (SAW) was him-self occupied with business before he became a messenger of Allah. He was a fruitful businessperson, famous for respectability and integrity, He got the honorific title Al-Amin. The Prophet (SAW) says “Seek for your source of revenue much beneath the soil – at each level of earth surface” It is the soul of Islam that no bit of cultivatable land is permitted to be left unused, in the light of the fact that; Islam guides its developers to be beneficial and effective in all extras of life”. Allah Almighty says “Don’t misuse your treasure/wealth; those associated with abusing wealth are the siblings of devil (Quran 6:141). The Prophet says 9-10th of the source of revenue lies in business exercises and 1-10th in agriculture. In reality, with shortage of entrepreneurial expertise and skills, no any business can be created. Once more, adequate quantities of business venture (ideally small enterprise) can be created by Zakat fund if appropriate approaches and methodologies are conceived by the Zakat executive organizations. Thus; poverty can be diminished essentially and significantly from the whole society and Muslims society specifically. In this way, zakat reserves can be utilized for creating business as an instrument of poverty easing from Muslim Society. But, there may have a logical inconsistency with respect to the utilization of zakat subsidise, in light of the fact that; the contention of this paper is that zakat reserve should be utilize as seed money (venture) as opposed to went through utilization (consumption). This is because of the way that a noteworthy extent of populace of Muslim nations are poor and who required essential needs and a few or even most pieces of the zakat finance is permitted to spend for addressing emergent needs of the poor people. For this situation, the contention of the investigation is that once the limit of poor is upgraded for working together then the chance to utilize other destitute individuals will likewise be expanded, therefore; the neediness would be decreased geometrically. 1.6 Islam, Zakat and Poverty Alleviation Touheed the basic faith of Islam. Mirza and Baydoun (1999) characterize Touheed as “Solidarity of Unity of only one God”. It is identified with the belief that this whole universe and its contents are made by God. And people as Khalifa are capable to deal with the world’ resources and the Ummah (believers) properly (Suleman 2003). Based on this idea, clearly one needs to adhere to the Islamic necessities so as to keep up a decent association with God. Generally, all Muslims accept that they are in charge of their activities and all activities are responsible to God on the Day of Judgment. As God made the whole universe, God is definitive proprietor of everything and people are just capable to steward the possessions of God. In this way, people need to deal with their property as per the God’s way. This principle idea comprises the special attributes of the Islamic economic system rather than the conventional economy. One of the uniqueness of the Islamic economic system is to obligatory to pay zakat (Nazri et all,. 2012) Prophet Muhammad PBUH was an ideal human being, a very honest and successful businessmen and also a political leader. Thus from Islam beginning, religious faiths has been grounded in everyday conditions of its followers. It is this reasonable and political focus that Islam has a lot to draw in terms of modern development concepts for example poverty. The issue of poverty and neediness isn’t new and has been looked by all civilizations (Yumna & Clarke 2011). Qardhawi (2009) analyses the situation of the poor of Egypt and Babylon before Islam was high because they have no access to the land and no entrance in profitable exercises. In satisfying their fundamental needs, poor offered themselves to rich peoples as a slave. Modern poverty remains generally a component of absence of access to productive capital. Islam straight forwardly addresses this issue by setting up the significance of social equity, social protection, and social solidarity within the Prophet’s Sunnah and Quran. Zakat is the commitment of the Muslim which establishes as one of the five basic pillars in Islam, a side from Shahadah (Profession of Faith), daily five time prayer, offer Hajj and Fasting. Zakat is payable on business incomes and resources, gold and silver, and savings at the fix rate 2.5% (Ibrahim, 2001). Muhammad (2007) claimed that Islam require its supporters to pay zakat so that cash gathered can be of assistance for the poor to have fundamental requirements in everyday life. Moreover, Sulaiman (2003) states that zakat plays a significant role in the economy, yet in addition in the moral and social wellbeing of a general public. As indicated by the Quran, Chapter Al Taubah, verse number 60 the eight recipients of zakat, are poor people, the needy, the chairman of zakat (amil), new converts Islam, the slave, the debtor (the individuals who in obligations to cover the fundamental needs), the individuals who act in the reason for Allah (Fi sabilillaah), and the traveller (Ibnu Sabil). These recipients are otherwise called asnaf. The target of zakat is to help the recipients in satisfying their fundamental needs and furthermore to accomplish financial equality. 1.7 Zakat mobilization to alleviate poverty through developing small business entrepreneurship From the day break of Islamic history, zakat has been assuming extraordinary role in diminishing poverty as well as in ensuring social advancement of low level people in society (Khan 2007) Zakat is additionally expected to build reserve funds since it removes a piece of the prudent savings (Choudhury 1983). Indeed, zakat is a verified awesome instrument of Islam from evacuating poverty from society. History demonstrates that by ensuring zakat based monetary framework, in human history poverty was mitigated from society in Madina and Arabian land under the initiative of Prophet Hazrat Muhammad (SAW) and His inheritors (khalifa) for which scarcely any one needed. Therefore Muslims were discovering hard to find poor and hungry so as to release their religious commitment to disbursing zakat. Actually, zakat can be utilized to encounter the instant existence needs of the extraordinary poor. Be that as it may, as poverty easing methodology, ability of poor people ought to be created through wellbeing, learning, health facilities, vocational training etc. Do forth with the goal that the poor can escape the poverty trap. And furthermore business enterprise ought to be created on primary basis, since, through business enterprise improvement programs it would be imaginable not only to evacuate poverty yet in addition to make work door open for some other poor. Thus neediness can be expelled speedily from society, such activities ought to be taken by administration in an Islamic state. Tragically, in the era of Muslim world, Governments are neither playing out these tasks completely nor proficiently, rather in numerous spots these institutions are misusing the zakat support. Accordingly, zakat payers are hesitant to offer or provide zakat to government. But at all the circumstances, it is the duty of Muslim scholars, pioneers, Imam and researchers to approach in creating awareness among the various classes of Muslims to assume their roles. The distribution of zakat fund in appropriate sum with legitimate technique for expelling the poverty will ultimately assistance in bringing prosperity, peace, equal distribution, flourishing of the Muslim world.(Hoque et al 2014) In the light of above conversations it very well may be said that zakat can be used for creating enterprise (particularly small) with a view to easing of poverty speedily. But, how can be utilized as seed cash as opposed to gone through cash consumption is an examination question? Thus, this investigation has built up the following procedure for growing little business enterprise by mobilizing zakat fund. 1.8 Zakat as a Method of Creating Entrepreneurs Zakat is a significant foundation in the financial structure of Islam (Muhamat et al. 2013). As a from basic pillars of Islam the primary target of zakat is to accomplish financial equity and socio-economic justice and it is deliberated as an worthwhile means of mitigation of poverty since Islam views poverty as a social and religious issue, because neediness drives an individual to wrong doing, criminality, corruption and sin Hassan 2006). Slightly as a holy and effective tool, zakat fund can lighten poverty successfully and speedily when it is utilized as seed money rather than consumption money for the more prominent and healthier advantages of the poor individuals; else, it will not crop much fruitful outcome. What’s more, just because of powerful and proficient application of zakat-based economic framework, the world has encountered a neediness free-society in mankind’s history in the area of Islamic State (where there was not a solitary poor to get zakat)under the initiative of Prophet Muhamad (SAW) and His inheritors (khalifa). Inappropriately, regardless of having a marvellous means of poverty easing like zakat, very nearly 35 percent of world’s poor are Muslims (World Bank 2010) and numerous Muslims pay no or slight attention regarding the Islamic rules while issuing zakat. This is on the grounds that, in one side, numerous Muslims lack due Islamic moral and information about understanding depth and breadth of zakat, and on the opposite side, lack of effectiveness of zakat executive institutions (both private and government) in Muslim societies. Accordingly, the utilization and practices of Islamic sanctions with respect to zakat administration have declined significantly over time, but distribution of zakat is as yet conveying huge significance in the day by day life of numerous Muslims. This is somewhat reflected through donation given to social and charitable organization functioning in Muslim societies for poor. In the vast majority of the cases, these types of personal and informal channels may not be effectively serving as a proper poverty fighting tool as zakat isn’t delivered to the correct group of targeted poor in an arranged and sorted way. In this way, poor remain poor, considerably to getting an attractive amount of zakat. 1.9 Research Questions 1. Why zakat is not uprooting poverty from Muslims society? 2. Is it due to lack of effective and efficient zakat management organization(s) in the Muslims society? 3. Is it due to spending zakat fund for consumption purpose not for investment purpose? 4. Is it due to lack of an entrepreneurship development model by zakat? Therefore, this study is conducted through a mixed method approach in which 28 participant were interviewed which include 7 participant from zakat management organization, 7 participant from Islamic scholars, 7 participant from senior citizens and entrepreneurs and 7 zakat recipients were interviewed to investigate into their poverty alleviation programs so that a comprehensive process model can be suggested for developing entrepreneurship by zakat mobilization for removing poverty. The rationale lies in the fact that comprehensive research regarding entrepreneurship development by zakat has been lacking. Chapter 2 2 Literature Review 2.1 Existing Literature Touheed the basic faith of Islam. Mirza and Baydoun (1999) characterize Touheed as “Solidarity of Unity of only one God”. It is identified with the belief that this whole universe and its contents are made by God, and people as Khalifa are capable to deal with the world’ resources and the Ummah (believers) propery (Suleman 2003) Ibrahim & Ghazali (2014) reported that many studies on poverty indicated that major factors that unable the poor to contribute in development process are the exclusion of poor from financial system, the growing population rate and less employment opportunities which create huge unproductive labour force. Kasali, et al., (2015) addresses that to face unwelcomed problem of poverty many sectors are working for financial Inclusion to provide financial services to the poor who have not enough access in order to climbing out from poverty, Microfinance is one of them which is playing a key role for the economic development. Parthab, et al.,(2018) examined that microfinance is an influential tool that mitigate the poverty and through poor people can access to many services such as venture capital, savings, credit, protection against risk on micro level, this ultimately leads to rise the economic security, assets, household income, demand and supply of goods and services, education and healthcare. Various studies indicated that the impact of microfinanace on the poor’s living standards is positive (Khandker, et al,.2015). But a significant percentage of household living in poverty, especially extreme poor are still out of the service of microfinance. The observation of the last some years indicated that while NGOs’ poverty initiatives, such as micro-credit schemes, have generally are fruitful in approaching the middle poor, such policies constantly serve extreme poor in an unsatisfactory way or absolutely bypass them (Emran, V. Smith, et, al,. 2014) There are numerous anti-poverty techniques which can be comprehensively arranged into two major approaches (i) indirect approach: that frame a macro-economic structure to make sure sustainable development, higher per capita and employment, ultimately decrease poverty, and (ii) direct approach: that aim to choose poor population and gives them financial assistance to get access in financial activities, improve wellbeing conditions, credit access, increase education rate and eventually remove poverty (Hassan 2006). Patel (2004) In Poverty alleviation strategies microfinance has become important component and has been increasingly play vital role in mitigate the poverty. Poor households have less opportunities and face many difficulties to make regular and exceed their income to save for future and are vulnerable to economic and physical downturns. Jamal and Sheikh (2013) Despite the numerous advantage, microfinance institutions face a scope of difficulties that limit their reach, particularly for the microfinance that it charge the interest for loans which is stickily prohibited in Islam. Conventional MFIs are working well in many Muslim majority countries but still instead of it many people who didn’t want to use these services because these microfinance services are not sharia compliant. Laila(2010) proposes that microfinance services should provide to poor peoples on more progressively and zero interest with benevolent willingness because high and compounded interest rate impose serious hardness on the poor people. Ahmed (2014) opine that accessibility of Islamic MF acquire moral change in their conduct and manners which is applicable and suitable to ease poverty and which additionally increase financial opportunities improve their income, consumption and crop production. Abdul Rehman et al., (2011) The capacity of zakat is to help poor and the needy in satisfying their fundamental needs. All together got the zakat to be effective in helping the poor individuals, it relies upon the strategy for distribution and furthermore the motivation behind it, create new lines and approaches for zakat distribution that are fit for delivering entrepreneurs among recipients are needed to create them independent and ready to help themselves. As discussed by Saad (2011) zakat isn’t constrained to giving subsistence living for the poor people however it rather targets enhancing them. In light of this, Zakat Institution has created programs which advance the monetary exercises among the asnaf with point of taking them out from the poverty. Nazdri F et al,. (2012) states that conjoining with different Institutions particularly the Microfinance Institution could help zakat institution in conveying comprehensive method of financing to the qualified asnaf. The asnaf who is skilled to work and have interest in business will be find and chose to participate. All things considered, the capital or business help for the gainful asnaf will be givin as a microfinance. Hassanain,K.M., (2015) analyses three models the waqf-based Islamic Microfinance Institutions, the Zakat and Awaqaf- based Microfinance Organizations model, and the initial theories provided in Islam that support the poor. Together with the belief of microfinance, Zakat and waqf are always endure as most appropriate tools for helping the poor who need financing and could directly be effective in reducing poverty. The paper derives strong suggestion that microfinance models should be integrated into the wider economic strategy. Md Salleh (2015) intent to Identifies how zakat institutions in Brunei can improve financial inclusion in their tradition, help to fulfil the saving in intentions of zakat beneficiaries and develop financial products/ solutions for the underprivileged and the needy. The paper underlines the requirement for the bank accounts and credit services that addresses the issue of recipient’s welfare in order to meet their basic needs, just putting something aside for the education of children and for the welfare of recipients who save. The findings demonstrate that zakat and social institutions in Islam can acclimate to modern personal finance challenges, in particular by improving the financial inclusion and understanding recipients’ saving intentions. Muslims can lessen poverty situation forever in a dramatic manner by creating enterprise by mobilizing their zakat fund in a wise and purposeful way and in this way can expand GDP. Truth be told, Islam as a belief of brotherhood and fellowship wish to make certain social and economic equity for generally all individual and Muslims in particular (Choudhery 2002). But, Islamic instructing of fellowship and social equity would not be significant except if joined by economic justice so everybody gets his due for his commitment to society. To seriously realize social equity, along these lines, all the assets at the disposal of individual must be used productively and equitably to satisfy the requirements of all and to realize a fair distribution of wealth (Sadeq 1996). Thus, Islam underlines distributive equity and integrates in its push to encourage brotherhood, among Muslims by gathering and distribution zakat and upholding Islamic teachings identified with law of inheritance to quicken distribution of wealth and income in the Islamic Community (Dogarwa 2008). A nation is not poor in account of the absence of resources; among others it needs adequate number of good business entrepreneurs (Hoque et al 2014). In the most recent decade, there has been rising attention in entrepreneurship as an instrument for mitigate poverty across worldwide limits (Murphy and Coombes 2009). It is not new that Enterprise can help to reduce poverty, log before it was presumed that entrepreneurial movement promote financial development (Schumpeter 1934) as vice versa. As indicated by Sadri (2010) business is both cause and outcome of financial development. Indeed, poverty doesn’t rely upon resource grants, monetary and social approaches, populace size, yet in addition on the kinds of financial exercises that are being incorporated (Dogarawa 2009). Exact studies uncovered that the issues faced by Muslim nations are chronic absolute poverty, disparity of income distribution, expanding imbalance of living standard, unemployment, less ideal satisfaction of education and health service, low degree of profitability in primary sector, declining in balance of payments and the most extreme is the foreign debt and failing of the institutional structure and arrangement of customs and values are progressively blurred because of external influences (Affandi and Astuti 2013). Without a doubt, poverty in the Muslim society is the result of numerous variables out of which absence of effective policies and procedures to create entrepreneurship is one of the key elements (Hoque et al. 2014) If you check Allah’s favouring you’ll not ever count it; most likely man is corrupt, sinful and unthankful. (Quran, 14: 32–34) Quran address in other verse Allah says: “Indeed, The ruler give provision to whom He wills and restricts it, He is ever, concerning His creature. Quran 17:30). Allah says: But look for reward and the means of what Allah has granted you for future abode, but do not neglect your share of this world. And be good to others as Allah has been good to you, and do not seek to spread corruption in the world, surely Allah does not love mischief-makers (those who commit great crimes and sins, corrupts) (Quran 28:77) Despite the fact Allah has made adequate assets still there is poverty and the major reason is that a couple of greedy persons own dominant part of resources. The word greed seems multiple times in the holy Quran. The greedy have more hunger for assets. Allah Pak Says: “The desire for ever-more worldly increase and to exceed to other expectations in such manner keeps you involved and which proceeds until you arrive at your raves” (Quran. 102:1-2). The Messenger of Allah (SAW) says “Watch out for greedy on the grounds that the individual before you died from it. Greedy drove them to be stingy so they become penny pincher” Greed move them to breakdown the ties (of family relationship) so they broke it. Greed push them to sins so they submitted sins. Ibn-e-Abbas portrayed that “Prophet said” if the child of Adam (the individual) had two mountains of wealth, he would want for a third, nothing can fill the wishes of son of Adam exception dust, and Allah excuses him who apologizes to Him” (Bukhari). Most likely, if all rich peoples play their successful and effective part in evacuating poverty, inside limited ability to focus time the word neediness would be no more on planet. Entrepreneurship is one of factor of production (Glancy and McQuaid 2000), motor of financial development (Azim 20111), because monetary growth of a nation is quickened by the exercise of qualified business entrepreneurs, (Matlay 2005). Islam et al (2011) originate that business entrepreneurship’s qualities altogether influence on the business accomplishment of SMEs. The Almighty Allah says “Business is legitimate for you” (Quran 2:275). Chapra (2008) pronounced that ‘need fulfilment’ of all is most extreme significance in Islamic state. Prophet Muhammad (SAW) was him-self occupied with business before he became a messenger of Allah. He was a fruitful businessperson, famous for respectability and integrity, He got the honorific title Al-Amin. The Prophet (SAW) says “Seek for your source of revenue much beneath the soil – at each level of earth surface” It is the soul of Islam that no bit of cultivatable land is permitted to be left unused, in the light of the fact that; Islam guides its developers to be beneficial and effective in all extras of life”. Allah Almighty says “Don’t misuse your treasure/wealth; those associated with abusing wealth are the siblings of devil (Quran 6:141). The Prophet says 9-10th of the source of revenue lies in business exercises and 1-10th in agriculture. Touheed the basic faith of Islam. Mirza and Baydoun (1999) characterize Touheed as “Solidarity of Unity of only one God”. It is identified with the belief that this whole universe and its contents are made by God. And people as Khalifa are capable to deal with the world’ resources and the Ummah (believers) properly (Suleman 2003). Based on this idea, people need to deal with their property as per the God’s way. This principle idea comprises the special attributes of the Islamic economic system rather than the conventional economy. One of the uniqueness of the Islamic economic system is to obligatory to pay zakat (Nazri et all,. 2012). Zakat is the commitment of the Muslim which establishes as one of the five basic pillars in Islam, a side from Shahadah (Profession of Faith), daily five time prayer, offer Hajj and Fasting. Zakat is payable on business incomes and resources, gold and silver, and savings at the fix rate 2.5% (Ibrahim, 2001). Muhammad (2007) claimed that Islam require its supporters to pay zakat so that cash gathered can be of assistance for the poor to have fundamental requirements in everyday life. Moreover, Sulaiman (2003) states that zakat plays a significant role in the economy, yet in addition in the moral and social wellbeing of a general public As indicated by the Quran, Chapter Al Taubah, verse number 60 the eight recipients of zakat, are poor people, the needy, the chairman of zakat (amil), new converts Islam, the slave, the debtor (the individuals who in obligations to cover the fundamental needs), the individuals who act in the reason for Allah (Fi sabilillaah), and the traveller (Ibnu Sabil). These recipients are otherwise called asnaf. The target of zakat is to help the recipients in satisfying their fundamental needs and furthermore to accomplish financial equality. Zakat is a verified awesome instrument of Islam from evacuating poverty from society. History demonstrates that by ensuring zakat based monetary framework, in human history poverty was mitigated from society in Madina and Arabian land under the initiative of Prophet Hazrat Muhammad (SAW) and His inheritors (khalifa) for which scarcely any one needed. Therefore Muslims were discovering hard to find poor and hungry so as to release their religious commitment to disbursing zakat (Choudhury 1983). The distribution of zakat fund in appropriate sum with legitimate technique for expelling the poverty will ultimately assistance in bringing prosperity, peace, equal distribution, flourishing of the Muslim world.(Hoque et al 2014). Chapter 3 3 Research Methodology The purpose of this paper is to suggest a process framework for the development of small business entrepreneurship by the mobilization of zakat to alleviate destitution functionally. The researchers developed a qualitative information collection approach and a thorough interview blending to understand the essence of the issue area in the development of the suggested process framework. Integrated research design comprises primarily of explorative and exploratory interviews. During the investigational process, twenty-eight members who are in some way linked to zakat, entrepreneurship, Muslim finance, and Sharia have gathered main information on the various forms of poverty reduction programs. To keep enough room between questions to respond to the commentaries of the interviewee, unstructured interviews were used. Those findings assisted to develop an initial concept of the efficacy of those programs that ultimately led to the last making of the final questionnaire. A closed-format is selected for easy answers to participants and for increasing the number of replies submitted and also for simple and unbiased data analysis. Consequently, the use of unstructured interviews was obtained from zakat receivers, in particular those who earned income in the form of consumed money. This is because of the reality that the study is focused on the statement that zakat must not be utilized as spent money but as seed money. Therefore, zakat receivers were chosen, who earned money as a consumer. During the time from 1 August to 30 December 2020, the survey was carried out using a purposeful excessive random sampling method from three representative major district towns of Jamshoro. 3.1 Data Analysis In an explorative action, via an unorganized procedure, 7 administrators of the zakat management organization and 7 scholars of Islamic law and Islamic finance were surveyed. The findings show that the zakat fund is being used entirely for personal consumption not really for useful activities; as a consequence, zakah does not eliminate destitution from societies as it may be. If the goal is to eliminate destitution, the Zakat fund could be used as capital investment. The outcomes of the analysis also showed that there are several forms of programs such as Guzara Compensation, Academic Scholarship to Learners of public institutions and Faith Schools (Deeni Madaris), Medical Care, Rehab, Vocational Facilities Marriages of deserving (Beneficiaries) Girls and Scholarships to deserving students. Intriguingly, it was noticed that while distributing zakat for alleviating poverty, there are several computational errors. As a consequence, the performance rate was found to be much smaller. 3.2 Model Discussion The suggested zakat mobilization design of the entrepreneurship growth process includes the following activities: zakah gathering, choice of potential poor, growth of desired poor technique, assessment of poorer skills, and formation of business ventures. Steps 3 and 4 of this system design were based on two possibly the best concepts: Becker's (1964) theory of human capital and Kirkpatrick's (2005) four-level training assessment taxonomy. Research into entrepreneurship cuts through domains and incorporates different hypotheses to describe phenomena. The researchers, therefore, evaluate the degree of multi-theoretical work within this channel (Marvel, Davis, and Sproul 2014). Marvel et al. also discovered capital investment entrepreneurial research channel concerning the level of observation, although conducted at different levels of analysis, the influential presence represented 67.5 percent of the level of observation in the individual accounting tier (Marvel et al. 2014) and is also in contrast to the present report. Below are comprehensive explanations of the research framework. 3.3 Collection of Zakat Collecting zakah from each and every individual zakah-able Muslim would not be a simple process, but for that task, a lot of things should be carried out carefully and gently. Knowledge amongst the Muslims, namely businessmen, farmers, industrialists, professionals and service holders, etc, must be established as part of the zakah range. Education should be given in all academic institutions (schools, colleges, universities, and madrasas) so that each Muslim may obtain adequate knowledge of zakat and, and the government must make zakat payment mandatory for each Muslim. Mosque clergy (Imams) have a very significant role in Muslim culture (Hoque et al 2013). In knowledge generation and encouragement about the value of paying zakah, they must step forth, because Islamic encouragement is better compared to the conventional motivational approach (Ather et al. 2011). Interestingly, the real zakah fund potential wasn't realized until the early 1990s, even in Malaysia. There were many explanations for this, such as lack of adequate knowledge on the zakah on the definition of different zakah-able objects in the communities and national skepticism about the efficacy of the zakah maintenance department (Yusuf and Derus 2013). There had been, therefore, three groups of zakah payers: those of us who gladly recognize and offer zakah, others who recognize but are reluctant to spend, and those that are ignorant of zakah payments (ATTAIC 2006; Yusuf and Derus 2013). Through most of Islamic history, till the fall of the Ottomans, zakah compilation and dissemination were among the roles of Muslim regimes. Besides, zakah was handled during all this time, apart from the state, through other governance frameworks, especially such as Awqaf (Trust) organizations. Indeed, the zakah transaction is an irreconcilable aspect of Islamic organizational culture (Hoque et al 2013). The organizational style set-up of NGOs is found to be more appropriate for zakah administration in modern culture. However, several traditional Islamic regimes are in charge of gathering and distributing zakah. Yemen is one of the few nations, as per Khan (2007), in which the state persisted to handle the storage and distribution of zakah even after the abolition of the Monarch of Ottomans. Today, Saudi Arabia, Malaysia, Libya, Pakistan, and Sudan are the key Muslim nations that have adopted legislation for the systematic collection and distribution of zakah by government agencies. These states make allowances in the law that make it mandatory to offer zakah on to entities produced by the state for certain particular items identified in the legislation, while the zakah on certain items not listed in the legislation is kept to be given willingly either to the government entity or somewhere else. There are several Muslim majority countries where government departments have been set back to receive and administer zakah, donated willingly by zakah payers. Bahrain, Bangladesh, Egypt, Indonesia, Jordan, Kuwait, Oman, and Qatar are among these nations (Khan 2007). The majority of the current countries, though, leaving it solely to the management (compilation and dispersion) of zakah by private (charity) organizations or NGOs. There is, therefore, no nation where all zakah responsibilities are made to move through structured channels (whether government bodies or NGOs, or charity firms). A significant amount of zakah moves via unofficial and unorganized or private networks in all states that are scarcely capable of ensuring that the zakah money is efficiently used as seed funding (investment) to reduce inequality in their communities. The consistency of this organization to produce secure and consistent capital to meet the plight of the population is the most significant reason for organizing the structured administration of this organization at the city, national and international scale in the current cultural frame. 3.4 Selection of Prospective Poor At this level, the zakah top management (person/team/institution) is responsible for selecting those poor (male and female) who have an adequate capacity from the viewpoint of overall fitness, the dream of becoming an entrepreneur, and mental capacity; since the only careful selection will ensure effective production of poor people's skills and can produce successful outcomes. Divorcees, orphans, and handicaps must, of course, take precedence over the circumstance. 3.5 Skill Development Education in administration has a huge effect on the performance of small companies (Marshall et al. 1995). There are, however, 3 types of skills: technological, human, and conceptual for effectively operating business enterprises (Katz 1974). Various types of training programs and seminars related to small firms for the chosen poor must be coordinated as part of knowledge and skills growth initiatives. For this, both established professionals and trained scholars with sound expertise and knowledge in small firms could provide preparation to the chosen poor for human resource development to operate and operate small company businesses (Hoque et al 2014). The conception of human resources has arisen as a widely used theoretical tool in entrepreneurial intentions (Marvel et al. 2014). However, until lately, entrepreneurial education and training (EET) overlooked a connection with existing theories that would clarify the connection between learning and entrepreneurial behavior (Martin, McNally, and Kay 2013). A couple of core reasons and meta-analyses have identified why intellectual capital is of particular significance for the growth of entrepreneurship (Martin et al. 2013). In reality, 65.6% of the key success factors in entrepreneurship leadership are linked to human resource skills (Ibrahim et al. 2012). With the aid of good training programs, people's skills can be improved so that they would run their company more easily and correctly. 3.6 Establishment of Business Enterprises In this step, the zakah department would help those poor whose ability is at a comfortable standard to set up small business enterprises. Since a lot of activities are needed to set up a business enterprise, setting up business enterprises can be very hard for the poor. On the contrary, on behalf of those whose competence is not at a satisfactory stage, the zakah department (authority/individual/team) must assume responsibility to set up and run business enterprises (where the poor would be the real owner). In reality, the poor would reap gain or total failure to be the real owners of businesses. However, because the company's management would be in the possession of an expert body, the leadership would earn salary/allowance from the profits of business companies for their precious knowledge and skills. Since it is the experience of many nations (such as Bangladesh) that the poor cannot effectively run their business enterprises only because of poor management skills, so the poor remain poor even after obtaining zakah in a good form as an organized business enterprise. But, according to their capacity, the poor (owners) will be able to do work in business enterprises. Chapter 4 4 Discussion Reducing poverty through zakah as a mechanism to grow entrepreneurship is the subject of the report. Grinding poverty still occupies many areas of the globe, amid 30 years of development initiatives by philanthropists, non-government organizations, and governments (Stiglitz 2002). The abject poor are those who live on less than the $2 a day equivalent (London and Hart 2004). Alvarez, Barney, and Anderson (2013) first proposed in their analysis that entrepreneurship is a driver of cross-border economic development in circumstances of extreme poverty. And an entrepreneurial philosophy focused on opportunities: exploration and conditions (Alvarez and Barney 2014). Eventually, these entrepreneurial prospects were described as possibilities for self-employment. Alvarez and Barney (2007) defined the idea that when structural flaws occur in a factor or specific industries, possibilities reside. That implies that only when competitiveness is not optimal will economic wealth emerge (Alvarez et al. 2013). To boost financial profitability, businessmen leverage these market blemishes. The theory of human capital implies that financial development is only feasible if there is development in training and education (Cohen and Soto 2007) that enables people to learn business skills to take advantage of the opportunities which are more advanced for their new company. But what is still missing is an entrepreneurial approach from the ground up that can improve performance and build wealth and success through creativity that can eventually ensure the safety of the marginalized in extreme poverty. It also lacks awareness of how entrepreneurship, and especially the creation of various types of resources, develops and contributes to economic growth to alleviate poverty. Therefore, the writers agree in the current study that the suggested system approach as a bottom-up entrepreneurial approach would address this study void with this entrepreneurial system to channel zakah for the intention of alleviating poverty. 4.1 Limitations and Future Research There are several drawbacks to this research that are worth noting. First, for investment purposes, this study is limited to zakah beneficiaries and the zakah team. Second, the analysis was carried out only in the Jamshoro-Hyderabad district, the second biggest region in Sindh. Future studies will involve consumption-purpose receivers and finance recipients for contrast to address these limitations. To maintain the generalization of the study, broad-based samples are drawn from a variety of Muslim countries and cultures. A prospective study can also help to predict future changes that will occur over time. 4.2 Assessment The administrator, founders, colleagues, and consumers of those business ventures where the poorer do works as part of their jobs should establish assessment criteria such as integrity, honesty, intellect, business interest, customers management skills, and required tools to evaluate the abilities of the chosen poor zakah management organization (authority, person, and team) Through assessment, if the ability of the chosen apprentices is at a comfortable standard, it is possible to provide them with the required recommendations and guidance to the next step of the process is that they will pursue steps to make small company businesses. To assess this given phase, the research establishes to use of the four-level training assessment model of Kirkpatrick as it relates to performance, quality, and influence concerns (Kirkpatrick 2005), which has been widely studied and implemented (Holton 2005). The four-stage model of Kirkpatrick asks the following questions: Level 1: how the participants felt about the training; Level 2: what the participants received from the coaching; Level 3: how the participants incorporated what they learned; and Level 4: how much the company gained from this activity (Khan and Ali 2014; Khan, Ali, and Arfeen 2014). If the ability of apprentices is not up to standard, it is important to arrange more training programs for them. Small business management success is based not only on administrators' expertise and abilities but also on external influences, such as social and political factors. But administrators with sound experience and expertise can address various small business management issues correctly and could therefore save the organization from collapse. Chapter 5 5 Conclusion and Policy Making The study explored the issues of destitution in Islamic nations, the efficacy of zakah organizations, the method of zakah dissemination, and the need for an entrepreneurial system in a moderate effort. Destitution is not attributed to a lack of money, but most often by a shortage of entrepreneurship (Gupta and Srinivasan 1992; Hoque et al. 2014). In the forefront of growth spheres among professionals, funding organizations, charitable organizations, politicians, and even in education, Zakah is a faith-based entity. Evolving entrepreneurship by alleviating poverty by zakah is a modern idea that opens a new reason to debate and argue. Zakah should be included in the business development literature and enforced through initiatives to alleviate poverty in international communities. Muslim countries' governments should take on the pioneering tasks of designing policies (considering Islamic Sharia) and strategies. In this respect, the government should effectively and efficiently use any opportunity and choice. Furthermore, each Muslim, particularly clerics, Islamic scholars, and Islamic personality, should play a sincere role in developing the knowledge among the masses of Muslim people that they pay zakah to enhance their skills for businesses successfully by producing zakah funds. Again, however, the policy does not prohibit the use of zakah as a priority for the elderly and disabled for the mode of consumption. It is to be understood that basic education is often difficult to receive because people in poverty sometimes concentrate more on their next meal than on school attendance (Yunus 1999). Finally, the multifaceted nature of poverty demands that poverty must be minimized multi dimensionally based on the production of human capital, the ingenuity, and resources of the disadvantaged, their resources, capacity, and their survival capabilities, which ensure their sustainability. In conclusion, the most significant aspect of this research is the outcome of an analytical effort to supplement established literature primarily conceptual on the role of zakah in alleviating poverty within an entrepreneurial context.