THE poor must not be allowed to endure poverty. But, they do because it is not obligatory to help them.
Perhaps that is why there are 1.5 billion people living below the poverty line in the world.
If helping the needy is made mandatory, we could eradicate poverty.
But, first, we must address the problem of hidden poverty — there are many who are poor,
but do not want to be identified as poor.
Switzerland presents a classic example. To everyone, Switzerland is visibly rich, but its Federal Statistics Office data indicated that 7.7 per cent of eight million Swiss citizens live below the poverty line.
That says a lot about Switzerland as the second richest country in the world in terms of wealth per household.
There is also the issue of multidimensionality of poverty.
Poverty is not just about income. It also takes into account poor health, inadequate education and job security.
In Indonesia, where culture and religion play an important part in people’s lives, these aspects govern their economic and financial decision-making.
Since different people have different characteristics, perhaps the way to alleviate poverty is by employing instruments that suit the values they hold.
About 87 per cent of Indonesians are Muslims and a high percentage of the poor are Muslims. Zakat has a role here to alleviate poverty.
Its goal is to achieve socio-economic justice and reduce inequality. Therefore, zakat is the correct approach to alleviating poverty in a Muslim-majority country, like Indonesia.
However, zakat’s capacity in helping the poor is limited, as it helps them with only their basic necessities. It has a short-term impact as it brings only immediate relief.
A long-term approach is to have another mandatory instrument.
Tax is a national instrument that also serves as a fiscal policy tool to control the country’s economic growth.
It funds government programmes to improve the people’s wellbeing, especially those who live below the poverty line.
Hence, combining two mandatory instruments — zakat and tax — can help tackle poverty.
Namira Samir
Research fellow, Central Bank of Indonesia