Impact of Zakah & Ushr on Poverty Alleviation

Using the basic-needs-based poverty line the incidence of poverty for the year 1987-88 and 1990-91 has been presented in Tables 1 and 2. Columns 1 to 3 of the Table 1 report poverty estimates excluding zakah and ushr money from households' income for the year 1987-88. The results are based on the basic-needs poverty line of Rs 213.17 per month per capita. These estimates show that 25.5 percent of the overall households, 14.3 percent of urban and 29.8 percent of the rural households in Pakistan were poor in 1987-88. Across the provinces, the highest incidence of poverty was found in Punjab (28.8 percent) followed by NWFP (27.0 percent), Sindh (18.0 percent) and Balochistan (13.7 percent).

The poverty gap (Pg) was 5.4 percent overall, 2.7 percent for the urban areas and 6.5 percent for the rural areas of Pakistan. The highest poverty gap was found in Punjab (6.5 percent) followed by NWFP (5.9 percent) and Sindh (3.0 percent) and poverty gap was the lowest (2.2 percent) for Balochistan. The same pattern was observed for P2 index in case of Pakistan and across provinces, i.e. income inequality among the poor and severity of poverty was higher in the rural areas of Pakistan. Among provinces, it was the highest in Punjab (2.2 percent) and the lowest in Balochistan (0.006 percent).

The columns 4 to 6 of the same table report the poverty estimates after including zakah and ushr money in households' income. The percentage difference is reported in column 7 through 9. zakah and ushr reduced poverty by 1.96 percent overall, 3.49 percent in the urban areas and l.68 percent in the rural areas of Pakistan. Among the provinces the highest reduction in poverty through zakah and ushr was found in Punjab (2.43 percent) followed by Balochistan (2.19 percent) and the lowest in NWFP (0.37 percent).

The poverty gap (Pg ) reduced by 3.70 percent overall, 3.70 percent in the urban areas and 4.61 percent in the rural areas of Pakistan. As far severity of poverty was concerned, it reduced by 5.55 percent overall, 12.5 percent in urban areas and 4.76 percent in the rural areas of Pakistan. Among the provinces, P2 reduced by 16.6 percent in Balochistan followed by Sindh (12.5 percent) and lowest in NWFP (5.0 percent).

Table 2 reports poverty estimates for the year 1990-91. The incidence of poverty, based on the basic-needs poverty line of Rs 281.13 per capita per month is reported in column 1 to 3. These results exclude zakah and ushr from households’ income. The incidence of poverty was 28.74 percent overall, 19.42 percent in the urban and 32.89 percent in the rural areas. Across the provinces, the highest incidence was found in NWFP (43.26 percent) followed by Punjab (29.36 percent) and Sindh (21.87 percent). The incidence was found to be the lowest (13.22 percent) in Balochistan.

The poverty gap (Pg) was found 11.22 percent overall, 6.35 percent in the urban and 13.39 percent in the rural areas of Pakistan. Across provinces, the highest Pg was found in case of NWFP (17.06 percent) followed by Punjab (2.00 percent), Sindh (7.04 percent) and the lowest poverty gap (4.53 percent) was found in Balochistan. P2 was 7.67 percent overall, 6.57 percent in the urban areas and 8.16 percent in the rural areas of Pakistan. The highest P2 was found in NWFP (12.55 percent), followed by Punjab (6.88 percent) and the lowest (4.71 percent) for Balochistan.

Columns 4 to 6 of the same table report the poverty estimates based on the same poverty line of Rs/281.13 per capita per month. However, in these estimates zakah and ushr money is included in the households' income. The percentage difference of these indices due to zakah and ushr is presented in column 7 through column 9 of the same table. The table shows that head count (Hc) decreased by 2.61 percent overall, 3.04 percent in the urban areas and 2.49 percent in the rural areas of Pakistan. Among the provinces, the highest reduction in poverty was found in Punjab (3.03 percent) followed by NWFP (2.45 percent), Balochistan (2.42 percent) and the lowest reduction of poverty was in Sindh (1.18 percent).

The poverty gap (Pg) was reduced by 28.52 percent overall, 18.26 percent in the urban and 30.69 percent in the rural areas of Pakistan. The severity of poverty as shown by P2 showed a significant reduction due to zakah and ushr. It reduced P2 about 43 percent overall, and almost the same reduction was found in the urban and the rural areas of Pakistan.

Estimates given in Tables 1 and 2 show that the incidence of poverty measured by headcount did not improve much over the two data periods, whereas the poverty gap (Pg) and FGT poverty measure (P2) showed a significant improvement in the later year 1990-91.

The incidence of poverty tended to increase from 1987-88 to 1990-91. The results of this paper are consistent with those of other studies made so far using the same data set that I used [see Malik (1994), Gazdar et al (1994) and Shirazi et al (forthcoming)].

Source: Poverty Alleviation in Pakistan: Present Scenario and Future Strategy, Mohibul Haq Sahibzada. Republished with permission.