Integrating Zakat and Awqaf with Microfinance Practices to Poverty Alleviation in Indonesia

Religious belief is a common human characteristic that is largely neglected within mainstream development practice and theory. Religious principles and social teaching however, can positively contribute to poverty alleviation. This paper explores examples of how Islamic principles of charity and finance can strengthen microfinance as a poverty alleviation strategy. It describes two cases study of Baitul Maal Muamalat Indonesia and Baitul Qiradh Baznas in Indonesia. The study shows although they have utilized zakat and Islamic charities as microfinance’s source of fund, they only targeted low income people with some form of employment. It can be argued that zakat and Islamic charities should be functioning as an additional fund to provide social services for the extremely poor and combined it with the commercial fund to achieve better outcomes in poverty reduction.