THE CONTRIBUTION OF ZAKAT TO NATIONAL INCOME IN MALAYSIA

Abstract

National Income (GDP) is a typical indicator of the wealth of a country. However, the expenditure method used to measure the country's wealth only takes into account some of the key components of expenditure such as consumption (C), investment (I), government spending (G) and net export (X-M). In the Islamic Economic System, expenditures incurred to assist the poor need to be taken into account as a (C) consumption in state revenue. This is supported by the literature study that zakat is an important instrument that can contribute to the consumption expenditure and ultimately to national income. Because there is no empirical study yet which shows the contribution of zakat to Malaysian income, this study is conducted to meet this gap using econometric methods; Ordinary Lease Square (OLS). The study found that there was a positive relationship between zakat and Malaysian income.