Zakat Supervision for Poverty Reduction in Bangladesh: Strengthening Islamic Social Finance through Effective Governance

Abstract

Zakat is a fundamental instrument of Islamic social finance with considerable potential to alleviate poverty. However, ineffective supervision, weak governance, and inefficient management practices often limit its contribution to sustainable socio-economic development in many developing countries, including Bangladesh. This study examines the relationships among Zakat Supervision, Zakat Governance, Zakat Management Effectiveness, and Poverty Reduction by proposing and empirically testing an integrated conceptual framework. A quantitative research approach was adopted, and primary data were collected from 384 respondents comprising Zakat administrators, donors, beneficiaries, and representatives of Zakat institutions in Bangladesh using a structured questionnaire. The data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) with Smart PLS 4. The findings reveal that Zakat Supervision has a significant positive effect on Zakat Governance, while Zakat Governance significantly enhances Zakat Management Effectiveness. Furthermore, Zakat Management Effectiveness has a significant positive impact on Poverty Reduction. The mediation analysis further demonstrates that Zakat Governance and Zakat Management Effectiveness jointly mediate the relationship between Zakat Supervision and Poverty Reduction, indicating a complementary partial mediation effect. These findings highlight that strengthening supervisory mechanisms, improving institutional governance, and enhancing management effectiveness are critical to maximizing the poverty alleviation potential of Zakat. The study contributes to the literature on Islamic social finance by introducing an integrated serial mediation model that explains how institutional factors collectively enhance the effectiveness of Zakat in reducing poverty. The findings also provide practical insights for policymakers and Zakat institutions seeking to improve governance practices and promote sustainable poverty reduction in Bangladesh.