The Potential of Zakat in Reducing Youth Unemployment and Improving the Quality of Economic Growth in Indonesia

Abstract

Purpose

This study explores how key economic factors like youth unemployment and Gross Domestic Product (GDP) directly and indirectly affect charitable contributions, such as Zakat, Infaq, and Sadaqah (ZIS), with inflation acting as a mediator. The goal is to understand how these economic dynamics shape people’s willingness to give and how zakat can be leveraged for broader economic development in Indonesia.

Design/Methodology/Approach

The research uses a quantitative approach, applying PLS-SEM (Partial Least Squares-Structural Equation Modeling) to analyze the data.

Findings

The study found that higher unemployment has a strong, negative impact on ZIS contributions (p = 0.020), meaning that when more people are unemployed, there’s less money donated to charity. Inflation also plays a negative role (p = 0.037). On the other hand, GDP doesn’t seem to directly affect either inflation (p = 0.069) or ZIS (p = 0.488). Additionally, inflation doesn’t appear to mediate the relationship between GDP, TPT, and ZIS. The model explains about 29.7% of the variance in ZIS, showing a moderate predictive power, but only explains 2.1% of the variance in inflation.

Research limitations/implications

One limitation of this study is that each economic factor was measured using just one indicator, which could limit the depth of the analysis. Future research could benefit from exploring additional economic variables and using multiple indicators to get a more complete picture.

Practical implications

The findings suggest that maintaining stable economic conditions, like reducing unemployment and controlling inflation, is crucial to boosting contributions to ZIS.

Social implications

By showing how economic struggles like unemployment and inflation negatively impact charitable giving, this study highlights the need for collaboration between the government and zakat institutions. Together, they can strengthen economic resilience and improve social welfare, helping to promote inclusive growth and fight poverty through the optimal use of ZIS.

Originality/value

This research makes a valuable contribution by quantifying the direct and indirect effects of major economic factors on ZIS, offering fresh insights into how economic conditions influence social giving in Indonesia

Keywords: Zakat, Youth Unemployment, Economic Growth, Indonesia