The Impact of Zakat as a Financial Inclusion Instrument for Sustainable Agriculture

Abstract

Zakat fund can be utilized as a zakat-based financing facility that empower smallholder farmer to practice sustainable agriculture. This study aims to measure the impact of zakat on agricultural productivity and smallholder farmer’s welfare by using productivity analysis, general poverty index as well as BAZNAS Welfare Index (BWI) which focus on the examination of sustainable agriculture project funded by BAZNAS since 2018. The results of this study indicate that the income of farmers is almost double from the conventional agriculture because the production cost of organic rice is 75% lower than the production of non-organic rice without subsidies and 59.4% lower than non-organic rice production with subsidies. The level of organic rice production also increase in the second and third seasons which are 4.65 and 4.32 tons/hectare or almost equivalent to productivity with conventional cultivation method. With this program, the number of underprivileged farmers measure by headcount index is decreasing based on poverty line standard and had kifayah. The impact of this program also shows good results with the BWI value of 0.78 when using poverty line standard and 0.53 based on had kifayah standard.