The Impact of Zakat on Aggregate Consumption in Malaysia

This study aims to look at the impact of zakat distribution on aggregate consumption in view of zakat distribution by zakat institutions is mostly in the form of money for basic needs and monthly cash support. The study uses panel data of states in Peninsula Malaysia and analysis is done by using the fixed effect model. The study finds that zakat distribution has a positif impact on aggregate consumption. However, the impact is small and short run. Hence this study recommends that zakat distribution should be not limited to the fulfilment of consumable needs only but should also cover other forms of monetary aid that can generate a continuous flow of income for zakat recepients.