Azhana Othman a* and Abd Halim Mohd Noor b

SUBJECTIVE POVERTY ANALYSIS ON ZAKAT APPLICANTS IN MELAKA Azhana Othman a* and Abd Halim Mohd Noor b Center for Islamic Philanthropy and Social Finance, Universiti Teknologi MARA (UiTM ) Melaka azhana395@bdrmelaka.uitm.edu.my b Center for Islamic Philanthropy and Social Finance, Universiti Teknologi MARA (UiTM )Melaka drabdhalim@bdrmelaka.uitm.edu.my a* Abstract Poverty is multifaceted and can be measured using both objective and subjective approaches. Objective approach views poverty in terms of quantitatively measurable indicators of welfare whereas the subjective poverty measures poverty according to personal judgment of individuals regarding their own welfare. It is important to understand this multifaceted poverty, because it will lead to different ways of strategies for more efficient intervention schemes aimed at poverty reduction. Currently, zakat institution only utilizes the objective measures such as PLI (poverty line income) and haddul kifayah. This interest is motivated by the concern for individuals who felt they are poor and deserve to receive zakat but their applications were rejected due to the objective indicators that indicate that they are not poor. Therefore, the primary objective of this study was to analyse the determinants of subjective poverty among zakat applicants. This study surveyed zakat applicants among the asnaf (poor and needy) in three districts of Melaka: Melaka Tengah, Jasin and Alor Gajah. The findings showed that demographic, socio-economic background, household type, marital status, education, financial stress, income, wealth and debt affect their perceived destitution. Therefore, this study aimed to assist zakat institutions in improving the process of identifying and selecting asnaf. Keywords: Multifaceted poverty; Objective poverty; Subjective poverty; Zakat Applicants. INTRODUCTION Poverty is a multifaceted phenomenon where different societies have different perceptions of poverty. Generally, poverty can be classified as: 1) absolute poverty, 2) relative poverty, and 3) subjective poverty. Absolute poverty means people who have less than the objectively defined thresholds such as the minimum food-calorie intake and basic needs. Those with income (expenditure) below a certain money metric of basic needs are classified as poor. Relative poverty refers to the people who have less than others in the same society (Hagenaars and de Vos,1988). Subjective poverty means 1

that individuals appraise their poverty status by themselves, subjectively. People would simply be categorized as poor when they consider themselves so (Niemietz, 2011). For years, policymakers largely took for granted the legitimacy and validity of the absolute poverty line as a means of defining and measuring poverty worldwide. Recently however, with increased pressure to answer for failed policies in the past and to meet renewed commitments for the future, the international community has doubled up its efforts to examine the root causes of poverty. Thus, the subjective poverty was introduced. Subjective poverty in dices attempt to overcome the arbitrariness of absolute and relative poverty measures. Subjective poverty allows each individual to assess their poverty status themselves. Different poverty measurement might produce different analytic results, thus a different set of policy interventions are needed to alleviate poverty. The stage of economic development also influence the choice of poverty measurement. While a country may be struggling with absolute poverty at the early stages of development, it may disappear as countries become richer, although the relative deprivation and subjective poverty may still persist (Dartanto and Otsubo, 2013). Objective Versus Subjective Poverty Measures Economists have argued that the current poverty measured using monetary approach is not able to reflect the multidimensional nature of poverty which has developed due to the rapid economic development process and changes in the economic structure (Alkire, 2010). Thus, there is need to look at poverty from a bigger perspective. Hence, poverty could be analysed in a more comprehensive dimension by the policy makers, by adding objective and subjective measures in identifying the poor. An important criticism of both absolute and relative concepts is that they are largely concerned on income and consumption levels which are objectively determined by researchers. Therefore, an alternative measure of poverty is needed. One such alternative is the use of surveys that ask people about poverty. The subjective approach starts by asking the poor how they evaluate their own situation (United Nations, 2010). Economists argued that the current poverty measured using monetary indicators or objective approach is not able to reflect the nature of poverty, calling the need to look at multifaceted nature of poverty by taking into account the subjective approach or non-monetary indicators. This is the standard font and layout for the individual paragraphs. On the Insert tab, the galleries include items that are designed to coordinate with the overall look of your document. You can use these galleries to insert tables, headers, footers, lists, cover pages, and other document building blocks. When you create pictures, charts, or diagrams, they also coordinate with your current document look. 2

Literature Review on Subjective Poverty 3 Ravallion (2012) stated that subjective poverty involves the poor who self-assess whether they are poor based on their well-being. Subjective measure is likely influenced by different aspects of an individual s life such as access to services, access to land, health, income, employment and basic needs. Subjective poverty is defined as an individual feeling and not an objective status. Thus, an individual may be physically poor but he/she has higher satisfaction or higher well-being. Niemietz (2011) summarized the two definitions of subjective poverty. Firstly, it involves an individual assessment of their poverty status. People are simply classified as poor when they consider themselves so. In this version of the subjective poverty concept, there is no limit on poverty threshold. Secondly, the poverty line or threshold is set using a majoritarian or democratic approach. People can be asked directly what they consider to be the necessary minimum income to maintain a decent lifestyle. Studies conducted by Jansen, Moses, Mujuta and Yu (2015); Teguh Dartanto and Otsubo (2013), Ravallion (2012), and Tsoka (2011) used the Minimum Income Questions (MIQ) where the respondents were asked to rate their monthly income using a five-scale range from very bad, bad, not bad at all, good, and very good. In another study, Posel and Morgan (2013) compared the objective and subjective measures in poverty. Others such as the study by Dartanto and Otsubo (2013) focused more on multifaceted poverty, classifying poverty experienced by Indonesia using five poverty indicators: absolute measures (calorie intake and expenditure poverty), relative measures and subjective measures (subjective well-being (SWB) and subjective poverty). Meanwhile, Jansen, Moses, Mujuta and Yu (2015) in a study in South Africa, calculated poverty using the following measures such as absolute income poverty method, relative income poverty method, subjective income poverty method, subjective poverty method and subjective well-being method. Some other researchers studied the determinants of subjective poverty such as Carletto and Zezza (2006), and Posel and Morgan (2014) who pointed out that subjective assessments of poverty are influenced by a range of factors in addition to the household s current economic resources, including the ability of the household to generate resources in the past and in the future, the household s access to basic services and the average health status of household members. Butler (2013) concluded that income poverty determines subjective poverty. Surveybased indicators of subjective well-being are amenable to quantitative analysis, and can be

explained in terms of numerous socio-economic variables. A summary of the expected sign of the partial effect of these control variables can be found in the table below: Table 1: Expected Influences of the Selected Variables for the Multivariate Logistic Regression Source : Buttler (2013) Compared to the abundant research on objective poverty (absolute), there has been little analysis on either relative or subjective poverty, particularly in developing countries. In Malaysia, most of the existing research on poverty is dominated by the objective-type absolute and relative poverty approaches. Zakat Institution and Poverty Islam has its own way of managing the problem of poverty. Muslims take care of their financial needs through internal safeguards to prevent the spread of poverty in the form of zakat, sadaqat and waqaf. Zakat is an obligatory charity while sadaqat and waqaf are voluntary charity. One of the main purposes of zakat fund is to help the asnaf especially the poor and needy to have better opportunities to have higher socioeconomic status. In Malaysia, zakat institutions are responsible as a medium to redistribute the wealth from the rich to the poor Muslims and to ensure that rightful zakat recipients or the asnaf could attain a minimum quality of life from the zakat received. Most of the zakat institutions in Malaysia measure and identify the poor using absolute PLI methods and recently, the Haddul kifayah (necessities of a household) approach. The Haddul kifayah has been adopted by a few zakat institutions such as Johor, Sarawak, Selangor, Wilayah Persekutuan, and Negeri Sembilan. 4

Table 2: Factors of Rejection by Zakat Institutions Factors of Rejection Frequency Percentage Income exceed PLI 16 3.5 No problem in basic meals 68 14.8 Husband/wife/children is JKM recipient 23 5.0 Member of household is zakat recipient 12 2.6 Children living together are financial supporting them 64 13.9 They have job and secure income 53 11.5 No dependency 18 3.9 They have other source of income such as husband's pension, SOCSO contribution, divorce alimony 47 10.2 JKM recipients 78 16.9 They are still young and productive 51 11.1 Not identified 24 5.2 Suggested for another type of zakat 7 5.1 Total 461 100.0 Source: Othman, Mohd Noor & Md Salleh (2014) A preliminary study was done by the researchers on the factors of rejection by zakat institutions in January-June, 2013 (Othman, Mohd Noor & Md Salleh, 2014). Table 1 shows that 16 respondents (3.5%) were rejected because their income exceeds PLI (objective measures) while the other factors of rejection were considered under subjective measures. The main factor of rejection was due to the fact that applicants (16.9%) are already recipients of the Department of Social Welfare (Jabatan Kebajikan Masyarakat-JKM) recipients. The second factor of rejection was that the households do not have problems in getting basic meals (14.8%), followed by the third factor where the applicants have children who support them especially in financial matters. These issues raise the concerns on why these individuals felt that they deserve to receive zakat when the poverty measurement suggests that they are not poor. Thus, there is a need to look at multifaceted nature of poverty that takes into into account the subjective approach or non-monetary indicators. DATA AND METHODOLOGY The aim of this study was two-fold: first, to provide a better understanding of the phenomenon and second, to analyse the determinants of subjective poverty among zakat applicants. The survey was conducted with the zakat applicants or asnaf - the poor and needy 5

- in three districts of Melaka: Melaka Tengah, Jasin and Alor Gajah from the 4 th until 9 th September 2015. Using the Poverty Participant Assessment (PPA) approach, every respondent was asked to evaluate their own poverty status. For this research, the focus group was the zakat applicants who requested for monthly food aid. They were asked to share their interpretations of poverty, especially why they considered themselves as poor. The respondents involved were from the list of new zakat applications and the reapplications. New zakat applicants were assessed on their eligibility to receive or not to receive zakat assistance. From the survey, the factors that contributed to rejection of zakat application were also identified. Meanwhile, from the re-applications, the researchers sought to determine the factors that made these rejected applicants feel that they are worthy of receiving zakat. ANALYSIS AND FINDINGS A structured survey questionnaire was designed to collect the relevant information. A total of twenty households provided complete information for the survey. The number of respondents were based on the number of zakat applications that reached the Melaka State Religious Islamic Centre or Majlis Agama Islam Melaka (MAIM). The respondents came from various DUN as reported in Table 3. Table 3: Number of Respondents according to DUN in Melaka on the 4-9 th September 2015 Date Dun Kariah No 04/09/2015 Melaka Tengah Taman Bacang Utama 3 Kg Solok Bukit Katil 1 Taman Saujana 1 Kg Tun Razak 1 07/09/2015 Melaka Tengah Pokok Mangga 1 Taman Limbungan 1 Crystal Bay,Alai 1 Taman Limbungan Permai 1 08/09/2015 Masjid Tanah Londang Palma 1 Londang 1 Londang 1 Masjid Tanah 1 9/9/2015 Jasin Kg.Lipat Kajang 1 Kg.Ayer Merbau 1 Ayer Merbau 1 Tmn.Sri Kemendur 1 6

Bukit Senggeh 1 Chabau 1 Total 20 Currently, most zakat institutions in Malaysia measure and operationalize poverty using absolute Poverty Line Income (PLI) methods and recently, the haddul kifayah (necessities of a household) approach was adopted by a few zakat institutions such as Johor, Sarawak, Selangor, Wilayah Persekutuan and Negeri Sembilan. Had al kifayah is used to determine the level of necessity needed by a household to sustain daily needs. Had al kifayah is calculated using various variables such as the number of members per household, age group of members, etc. To determine the category of the household, whether they are poor or otherwise, the following calculation is used: Excess income = Total Income Total Expenditure on necessities of a household. However, MAIM is still applying the PLI as a measurement to identify the poor. According to the Economic Planning Unit (EPU), the poverty line for 2012 is in line with the Tenth Economic Plan (RMK - 10). The poverty line (PLI) for food and non-food items that has been established for poor households according to the calculations above is RM830 per household. Table 4: Objective and Subjective Poverty Assessment among Zakat Recipients Objective Poverty Subjective Poverty Objective Poverty & Subjective Poverty No of response 6 11 6 % response 30 55 30 During the study, the respondents were asked to evaluate their poor condition based on why they felt they deserved to be given zakat. According to the current PLI, only 30% of the respondents were considered as poor as their income were below the PLI. Whereas, 55% considered themselves as poor and deserved to receive zakat. These applicants cited that they did not have income due to old age, having chronic sickness and low education background as their reasons for wanting zakat. Some felt that they deserve to receive zakat because they are single mothers or widowers. Only six percent fell into both objective and subjective poverty where their income was below the PLI and thus they felt poor due to their inability to settle 7

their bills and debt. They also had no income to spend as they did not have a job and a regular income. Table 5: Subjective Poverty Analysis on Zakat Applicants Category label Count % responses % cases Not suitable to work due to old age 1 1.32 5 Hard to find suitable job due to old age 5 6.58 25 Did not have formal education and hard to find a job 1 1.32 5 Did not finished schooling and hard to find a job 11 14.47 55 Divorcee and did not get divorce alimony 3 3.95 15 Husband passed away 3 3.95 15 Separate without alimony 2 2.63 10 No job 5 6.58 25 Do not have permanent job 2 2.63 10 Got fired 2 2.63 10 No income 9 11.84 45 Uncertain income 2 2.63 10 Laid off without compensation 2 2.63 10 Cannot afford to pay bills, rent etc. 3 3.95 15 Chronically ill and cannot work 4 5.26 20 Half paid due to medical leave 1 1.32 5 Mental ill and hard to find suitable job 1 1.32 5 Spouse does not work because looking after the sick people 5 6.58 25 Spouse does not work/housewife 4 5.26 20 Spouse also ill 1 1.32 5 Did not own house 4 5.26 20 The child does not help financially 3 3.95 15 Family does not help financially 2 2.63 10 Total responses 76 100 380 Table 5 shows the subjective poverty analysis of zakat applicants. They felt that they are poor because 55% could not find jobs due to lower education level, thus 45% did not have income. Another 25% could not find suitable jobs due to old age, jobless and also the spouse did not work because of looking after the sick people. Twenty percent were those with chronic illness who felt that they were a burden to the family, and that they could not provide financial support to families. Furthermore, their spouses also could not go out to work because they were 8

looking after the sick people in the family. They also felt poor if they did not own a house. The findings are contrary to the opinion of Butler (2013) shown earlier in Table 1 where age, level of education, and types of occupation do have positive influences on why the poor feel poor. CONCLUSION The findings show that demographic, such as old age and education level, significantly explains the variation of likelihood of being poor. These factors limit their capability to find suitable jobs. Household type referring to whether the households are nuclear or extended family does influence their poverty assessment. The more adults who make financial contributions to the family will lessen the feeling of being poor. In this study, the marital status, whether divorced, separated or single mothers, also affect their own poverty assessment. The financial stress, income, wealth and debt also affect their perceived poverty. REFERENCES Alkire, S. & Santos, E. M. (2010). Acute Multidimensional Poverty: A New Index for Developing Countries. OPHI Working Paper No. 38. Oxford University Press. Carletto, G. And Zezza, A. (2006) Being Poor, Feeling Poorer: Combining Objective and Subjective Measures of Welfare in Albania. The Journal of Development Studies, 42(5), Pp. 739-760. Dartanto, T., & Otsubo, S. (2013). Measurements and Determinants of Multifaceted Poverty: Absolute, Relative, and Subjective Poverty in Indonesia. No.54, JICA Research Institute. Retrieved on 5,July 2014 from http://jica-ri.jica.go.jp/publication/assets/jica- RI_WP_No.54_2013.pdf. Hagenaars, A. and K. de Vos (1988). The Definition and Measurement of Poverty. Journal of Human Resources, Vol. 23, No. 2 (Spring, 1988), pp. 211-221. Herrera,J., Razafindrakoto,M. & Roubaud,F.(2006). The Determinants of Subjective Poverty: A Comparative Analysis between Madagascar and Peru. Development Institutions and Analyses de Long terme (DIAL),Paris. Jansen, A., Moses, M., Mujuta, S., & Yu, D. (2015). Measurements and determinants of multifaceted poverty in South Africa. Development Southern Africa, 32(2), 151-169. Niemietz, K (2011). A New Understanding of Poverty. London: London Institute of Economic Affairs. 9

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