Master in Islamic Finance and Banking, UUM 2012 1.

0 INTRODUCTION In this summary, I choose five articles regarding on the same topic which is Islamic economy. Generally, the articles focused on Islamic Macroeconomics issues, the poverty problems regarding on inequality income and the power of zakat in order to alleviate the poverty. All the articles are done from year 2006 until 2010. This summary consists of 4 sections which is introduction, articles summary, criticize of the article summary and conclusion. The summary regarding Islamic macroeconomics will be explained in the next section. 2.0 ARTICLE SUMMARY 2.1 ISLAMIC MACROECONOMICS This subtopic is very important to understand deeply about the overview of the Islamic Macroeconomics. According to Choudury (2006), the paper aims to offer a new perspective on the nature of Islamic economics and the researcher wants to address the issue of the mainstream tradition without noticing the micro-interface of the theoretical nature of Islamic economics. Besides, the author wants to examine the nature of Islamic economics as an interdisciplinary paradigm that explains interaction over the domains of the moral guidance which is Ilm, laws and the formative world-systems according to such discursive impulses and process (Shuratic). The author had focused his study on systemic unity of knowledge, meaning of ethics and morality are derived from the epistemological premise of unity of knowledge. The researcher had used the method of comparative study of received literature in the history of economic thought and contrasts the ethical foundations of Islamic economics from the mainstream dichotomy between microeconomic and macroeconomic parts. The paper found there is a cogent microeconomic foundation of Islamic economics for the economy-wide treatment of ethical
FATIN SYAZWANI BINTI SAFIYUDDIN 812878 ISLAMIC CONOMICS (BIEE 5013)

Master in Islamic Finance and Banking, UUM 2012 economic issues and problems including the policy framework. However, the researcher limits his paper regarding theoretical exploration only. 2.2 THE CHALLENGE OF POVERTY AND ISLAMIC ECONOMICS Based on Farooq (2008), he stated that in 2004, there are 980 million people are absolutely in poverty line which means the individuals who are living in households with command over no more than $1 per day per person valued at international prices. Therefore, he wants to focus the potential of Islamic economics in order to alleviate the challenge of poverty in the Muslim World. In his paper, he stated that Nabi Muhammad S.A.W concerns about the establishment of society which is reforms in peoples attitude and institutional policies and frameworks to help those in poverty through zakat. The objective of this paper is to study how far the Islamic economy can challenge the poverty or Islamic economy itself suffering from poverty of substance. The researcher used several questions in his exploratory paper. 2.3 ZAKAT After seeing the challenge of poverty, we need to explore about the power of zakat in order to alleviate the poverty. Based on Shirazi and Fouad (2010), their paper is the extended and updated version of Shirazi (2006), which covers 38 OIC member countries. In their study, they want to estimate the resource that have to require and the potential of zakat collection in order to eliminate poverty. They had stated that different policies and strategies to safety-nets program have been adopted in the past to alleviate poverty, but poverty still persists. It is because some of the Muslim countries have implemented the system of zakat officially and while in other it is unofficial matter and they have ignored the collection and distribution. They also stated that none of the Muslim country has enforced zakat in letter and spirit. Therefore, they really believe that if
FATIN SYAZWANI BINTI SAFIYUDDIN 812878 ISLAMIC CONOMICS (BIEE 5013)

Master in Islamic Finance and Banking, UUM 2012 the system is enforced in letter and spirit, the extreme poverty can be eliminated. The authors had used Poverty Gap Index under US $ 1.25 a day and US $ 2.0 a day as reported in World Bank (2009). Total number of population is taken from World Development Indicators (2007), while GDP (at PPP) from 2005-2007 are taken from the CIA World Fact books and Development Data Group, the World Bank (2008). The result of the study regarding resource shortfall for poverty elimination was arranged by three groups of countries which consist of Group 1 for the Countries with Moderate Resources Shortfall (1.0 percent of GDP), Group 2 for Countries with Intermediate Resource Shortfall (1.0 percent to 6.0 percent of the GDP) and Group 3 for Countries with severe Resource Shortfall (6.0 of GDP). Besides, in terms of resource shortfall and potential zakat collection, the authors had put the result in table 4 and they found that the resource requirement under US $ 1.25 a day, of the countries in Group 3, for poverty elimination is too high, which cannot be met by their potential zakat collection. In overall, the paper found that all the countries from Group 3 cannot meet their resource requirement by their own potential zakat collection, half of the countries from Group 2 cannot meet their resource shortfall from their potential zakat collection while the rest of the countries of the group can meet their resources shortfall from their own potential zakat collection. The paper recommends that pooling of zakat funds from the zakat surplus countries and providing for the resource deficit countries to eliminate the poverty. They conclude that the resource shortfall under US $ 2.0 a day is high. Countries, which could meet their resource shortfall under US $ 1.25 a day from Zakat proceeds, are not able to meet their resource shortfall under US $ 2.0 a day. The countries which added to such list are Djibouti, Pakistan, Tajikistan and Yemen. The maximum zakat that can be collected is estimated to be 4.31 percent of the GDP of all countries under study, whereas corresponding resource required are estimated to be 5.20 percent of the GDP of these countries. However, some

FATIN SYAZWANI BINTI SAFIYUDDIN

812878

ISLAMIC CONOMICS (BIEE 5013)

Master in Islamic Finance and Banking, UUM 2012 resource rich countries are not included in the sample due to non-availability of data. If these countries also collect zakat to its potential and transfer their surplus to the common pool which could be provided for the resource deficit countries, then the deficit in resource can be met and poverty under US $ 2 a day can easily be eliminated. Besides, Dimas and Raditya (2010) stated that the role of zakat is relevant to alleviate the poverty. The objective of the paper is to discuss the structure design of zakat in order to maximize role of zakat subsequently mitigate the poverty. In their study, they stated that zakat as ones of five pillars in Islam are originally developed in order to mitigate social inequalities incurred as a result of economy activities. Therefore, they disclose several assumptions lay zakat as expenditure part in order to be able to generate its potential effects on the distribution. First assumption is zakat proceeds are sufficient to cover needs. Second assumption is government has responsibility to collect and distribute zakat. Third assumption is the government has an authority to regulate the methods and approaches of zakat disbursement. Fourth assumption is the costs of collection and disbursement are minimized and the fifth assumption is zakat does not create economic injustice in terms of equity and it does not reduce other government revenues. They had analyzed their study in the aspect of the effectiveness of zakat from macro model perspective, the picture of poverty and the potential of zakat in poverty alleviation. They recommend that some policies should be stipulated to attain goals of zakat in order to mitigate the poverty and promote dignity of Muslim Ummah. Despite there are many evidences regarding zakat which can help the needy, but constraints still faced the lack of knowledge about the advantages of zakat affect the awareness of people to meet their obligation. Based on Barizah and Majdi (2010), the purpose of his paper is to identify factors that may influence the Muslims behavior towards zakat on income. He took academicians
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Master in Islamic Finance and Banking, UUM 2012 from three faculties in the International Islamic University Malaysia as sample in his study. They were sent self-developed questionnaires requiring them to indicate their level of agreement on certain factors which might influence them in paying zakat on income. According to the result of the survey shows an encouraging percentage of respondents do pay zakat on income but the author still believe that the fact still remains that only 33% of those potentially-eligible zakat payer in IIUM actually pay zakat. It indicates that there are still a lot more to be done by those involved in the collection of zakat, not only in IIUM, but throughout Malaysia. The author also stated that in fact, the scenario in IIUM can be considered as one of the benchmark to assess the potential of zakat on income elsewhere. It is because IIUM is an Islamic institution which supposedly becomes the role model for other institutions, especially in the issue of compliance to religious obligation. This study, in particular, found that internal factors still remain as important influences for the majority who pay zakat, as compared to the external factors. Therefore, the researcher recommends that there is a need of proper education on zakat which probably can help the ummah to benefit from the noble system of zakat. 3.0 CRITICIZE OF THE ARTICLE SUMMARY Nowadays, there is no doubt that there are various forms of literature debate in Islamic economic issues, especially in the aspects of macroeconomics, inequality of income, and the ownership of the property but it is very limited. In the contemporary Islamic references on this problem is not found and deeply discussed and sometimes just a small topic in a book or magazine. This also can be seen in the writings of Choudury (2006) about Islamic Macroeconomics which explained theoretically exploration only. The writings should be followed by empirical analysis in order to understand deeply about the Islamic macroeconomics.

FATIN SYAZWANI BINTI SAFIYUDDIN

812878

ISLAMIC CONOMICS (BIEE 5013)

Master in Islamic Finance and Banking, UUM 2012 As we can see many papers and studies discussed about the economic matters such as poverty because of the inequality income, unemployment and several factors but the writing does not keep pace with the power of Islamic economics and the beauty of Islamic teaching to solve the problem. Therefore, the writing of Farooq (2008) should be praised. The explanation is very interesting because he came out with the statistics of poverty in Muslim World and then he continues with the background of Islamic economics and how the Islamic economic solve the poverty problem. The study about poverty elimination and potential of zakat collection also explained by Shirazi and Fouad (2010) and they focused on the OIC-member Countries only. However, the method in their study was not clearly stated. Moreover, Dimas and Raditya (2010) had chosen an interesting topic which is The Power of Zakat in Poverty Alleviation but their explanation is hard to understand. Last but not least, based on the Barizah and Majdi (2010), the findings is bias in its sample selection whereby it does not represent the real state of affairs in the society at large and the survey received a very low response which is 13.2% and thus limits its generalizability. However, the result is still useful as they pinpointed certain essential issues which need to be considered by those who are involved in zakat to map their strategy towards enhancing the efficiency and effectiveness of the noble system. 4.0 CONCLUSION Based on the summary above, zakat which a part of Islamic economy is a popular topic to discuss in the context of ilmiah compared to the other areas. However, the tendencies of Islamic thinkers to discuss the issues are very limited. Besides, the implementation of Islamic economy
FATIN SYAZWANI BINTI SAFIYUDDIN 812878 ISLAMIC CONOMICS (BIEE 5013)

Master in Islamic Finance and Banking, UUM 2012 is still at the early stage and it is probably have a lot of constraint because of lack of expertise in this field.

FATIN SYAZWANI BINTI SAFIYUDDIN

812878

ISLAMIC CONOMICS (BIEE 5013)

Master in Islamic Finance and Banking, UUM 2012 REFERENCES

Bakar, N. B., & Rashid, H. M. (2010). Motivations of Paying Zakat on Income: Evidence from Malaysia. International Journal of Economics and Finance , 76-84. Choudury, M. A. (2006). Islamic Macroeconomics? International Journal of Social Economics , 160-186. Farooq, D. M. (2008). The Challenge of Poverty and the Poverty of Islamic Economics. Journal of Islamic Economics, Banking and Finance , 35-58. Kusuma, D. B., & Sukmana, R. (2010). The Power of Zakah in Poverty Alleviation. The Tawhidi Epistemology: Zakat and Waqf Economy , 409-434. Shirazi, N. S., & Amin, M. F. (2010). Prospects of Poverty Elimination through Potential Zakat Collection in OIC-member Countries: Reappraised. Journal of Islamic Economics, Banking and Finance , 56-74.

FATIN SYAZWANI BINTI SAFIYUDDIN

812878

ISLAMIC CONOMICS (BIEE 5013)