The Role of Digital Zakat Towards Economic Development at Slums in Indonesia

Abstract

Purpose: The purpose of this study is to reveal that digital Zakat has a role in economic development. Even when disasters hit densely populated areas in big cities, Zakat is distributed quickly and precisely. Research design, data, and methodology: This study uses literature studies with an approach to Islamic economics and sociology of society. The authenticity of this research is about the potential role of digital Zakat which can create sustainable economic development in slums. Result: The results of the study concluded that economic development in slums could be carried out if it collaborated with Zakat institutions which were carried out in several stages. The existence of sustainable solidarity is a serious threat in the effort to achieve development goals and this is very regrettable by almost everyone because it can increase economic inequality. Conclusion: Strategy development is obtained from empirical evidence, the construction of slums that have been carried out by other countries in various parts of the world who also have the same problem. Although statistically not analyzed the relationship between the potential for Zakat and the level of welfare of densely populated settlements, theoretically digital Zakat can be one of the pillars to achieve community welfare through the distribution of Zakat.

1. Introduction 

The condition of the poor, especially in 'densely populated areas (in other terms; slums) in urban areas is very vulnerable to various social and economic problems. Digital Zakat is present as one of the programs of the Amil Zakat Agency in Indonesia, making it easier for muzzaki to distribute their obligations, one of which is a form of social responsibility for mustahik. Both of these discussions are related to one another.

In the early 2020s, several regions, even large cities such as Jabodetabek (Jakarta, Bogor, Depok, Tangerang and Bekasi), in Indonesia were affected by extreme flood disasters. One of the quick responses in this situation was by the Zakat Management Institutions such as the National Board of Public Works and Institutions Amil Zakat (Ucu, 2020). For international audience, perhaps briefly explain Zakat and related Islamic concepts here

Zakat funds that are distributed quickly through flood disaster response units can provide positive benefits for the people who are being hit by these disasters.

Dense settlements in big cities in Indonesia are very alarming and require community empowerment and governance of habitable settlements for the people. Various socio-economic and ecosystem problems will worsen this situation if it is not immediately addressed quickly and appropriately by the government. City growth is not commensurate with economic and social development being a socio-economic symptom of the many people who are under poverty. The economic and political structure of the country and the effects of poverty and the environment are generally responsible for poverty in urban areas and the existence of such settlements in densely populated urban areas both physically and socially (Crank & Jacoby, 2015).

Dense settlements are a significant environmental issue that in dense urban settlements are common problems that can impede the sustainability of domestic investment , high basic service prices, worsen the quality of housing, face weak waste management, and even evictions (Adubofour, Danso, & Quansah, 2013; Ahmed, 2014). This study would like to disclose that there is a crisis facing people in urban slum settlements that is much worse than in rural areas.

In this case, technological developments can help provide better solutions. The use of innovation in technology cannot be underestimated. Although it has a negative impact (Zaenuddin, 2019; Larasati & Winanda, 2018), the positive effect is also able to provide economic value to the community.

Digital technology is one of the new forms of innovation among the Zakat Management Institutions today. At the Word Forum Zakat Conference (WFZ) held at the end of 2019 is a proof of digital Zakat technology that helps increase the potential for receiving Zakat. (Zaenuddin, 2019; Larasati & Winanda, 2018). In the midst of searching for different solutions that are very disturbing to eliminate poverty in the slums. In conditions and problems such as natural disasters and calamities that cannot be calculated and empowered, human resources (mustahik) through the distribution of Zakat can quickly be appreciated.

Various debates about the impact of the technological revolution must indeed be sought and the solution sought. Islamic theological concepts based on the Koran and As Sunnah will provide sufficient understanding of how to use Zakat management technology. Digital, simple, the idea of 'digi-grasping' is required to examine knowledge and engage individuals in the digital world. (Dufva, Tomi, & Dufva, 2019). Then the transition of broadband technology to distribute digital inclusion in order to address the digital population (Philips & Wiliams, 2018) and the role of educational technology in improving the quality of human capital needed (Achyanadia, 2016). This is due to the decline in spiritual values, both as individuals and as a society (Beik & Arsyianti, 2018).

2. Research Methods and Materials

The research aims to explore the management of digital Zakat which has a role in economic development. This study uses literature studies with an Islamic economic approach and sociology of society. Data sources were obtained from data from the Indonesian Central Bureau of Statistics, Information Center for the National Zakat Agency (PPID) Baznas, and previous studies relevant to research on Zakat management for poverty alleviation efforts in Indonesia.

3. Results and Discussion

3.1. Slum and Economic Development

Dense habitation or slums— The word is used for substandard housing areas that do not adequately and/or are too dense for basic services, and thus the quality of public health and the environment is very poor, unhealthy, and socially undesirable. This issue is a major problem in some developing and poor countries. This problem concerns the problem of affordability and the large number of homeless people who take up residence in densely populated and illegal settlements (Harris, 2009).

The term slum has a cultural meaning and is degrading with social and physical connotations. This is commonly used by outsiders and is a poor connotation to justify public action on environmental issues and is rejected by local populations, so that the notion of inhabited settlements would be regularly used in this report.

The densely populated areas of the big cities that have arisen in developing countries represent a chaotic process of urbanization. The main reason for this process arises when hopes in big cities can provide a better economy than their home areas, where more job opportunities are created in big cities (Stokes, 1962). A study analyzing the cost of repairing densely populated areas shows the difficulty of obtaining reliable data to examine the costs for the Low Income Population Program or rehabilitating degraded settlements. The number of different criteria as indicators is one of the challenges in developing the right strategy (Abiko, 2003). This problem requires broader work and involves at least some restructuring of the system, roads, relocation and/or housing and doing construction work that often affects areas around densely populated settlements. The most important thing is to compile basic costs and technical data that lead to long-term strategies and capture use of technology to minimize costs or increase the ratio of cost and benefit interventions.

Major relocation projects are undertaken in some developing countries, in particular Asia, South America, and in some cases in Africa, such as Egypt and South Africa, which have densely populated populations, such as Indonesia, in an attempt to overcome this problem.

The majority of poor and marginalized families in densely populated areas were moved as a flood risk reduction strategy to rebuild life in safer locations. Sri Lanka's experience shows that relocation projects have been guided by project specific guidelines as opposed to general guidelines, which have resulted in successes and failures. These findings show that addressing the dense population problem demonstrates the need for detailed guidance for the three main stages of the relocation process: immediately after relocation, before resettlement (pre-relocation), and two years after relocation.

Such policy guidelines require a survey of households in settlements and community leaders. This emphasis on relocation considers future community livelihoods. Therefore, relocation does not always go well because of livelihood problems and negative effects that affect changes in people's culture. (Fernando, 2018)

Treuke & Stephan (2019) reveal that there are three main dimensions in assessing environmental impacts as a strategic step towards the welfare of a densely populated population, namely the material, social and symbolic dimensions. With regard to the material dimensions, cross class relations by nexus jobs are fostered by geographical proximity, but social segmentation has increased social hierarchies in terms of access to schools, hospitals and leisure activities. In the social dimension, a high degree of cohesion and unity has had positive consequences for job quest, resource access and territorial identity strengthening processes. Statistical discrimination has had deleterious effects on economic integration with the symbolic dimension (Treuke, 2019)

The project to increase dense human settlements is opened in four basic stages, namely: 1) Preliminary study: this stage is very important to determine the technical, physical and legal feasibility of implementing improvement projects in certain fields. This phase will include initial contact with the community; 2) Registration: After the upgrade project is considered feasible, occupants must be registered. To avoid swelling of numbers that benefit from an increase, it is recommended to have the local population assist with the registration procedure and decide which families will benefit; 3) Project design: The selected area will be subdivided to accommodate the largest number of registered families in the best possible way, with each family supplied with water, electricity, internal roads and drainage, telephone and wastewater facilities, and space needed Utility for installation of this device. This means designing a project that meets the needs most efficiently; and 4) Execution: construction time will depend on the terrain, financial availability and community involvement. Flat terrain and easily accessible sites will speed up construction and vice versa. Implementation time can vary from several months to years (Abiko, 2003).

3.2. Potential of Digital Zakat

In Islamic economics, the importance of the distribution of Zakat for mustahik is often associated with economic conduct based on the principles of sharia; the following: 1) actions in the construction of a good and right mental person; 2) the empowerment of Zakat as an instrument for economic development; and 3) management arrangements for the Zakat Institution covered by law through the Law (Pamudji, 2013)

Ghofur's research results state that, Zakat institutions in Indonesia have not been able to realize the prosperity of Muslims. Despite its management since the 1980s, the issue of Zakat has not been resolved until now. The allocation of Zakat to the public interest can be maximized if it is possible to empower the management of human capital (HR) in accordance with the principles of Islamic economics. (Ghofur, 2010). Abdullahi revealed that, "Zakat generates large and measurable social benefits to help people and companies. The role of charity can promote halal business, poverty alleviation, and sustainable development and social responsibility (Abdullahi, 2019).” If the principles of sharia in the digitalization of good Zakat are applied consistently, it will certainly further limit the evil intentions of the elements in the company or institution. This must also be supplemented by concrete and explicit rules that force companies to adopt the principles of Good Corporate Governance as guidelines for corporate governance. (Aspan, 2017)

One of the advantages of sharia principles in digitizing Zakat is to increase the efficiency and effectiveness of the Zakat institute program. A study has revealed that using the compulsory savings method for productive Zakat recipients can increase the success of Zakat institutions' programs (Hassan & Noor, 2015).

The attitude of an individual towards the use of an object (attitude towards using) is a positive or negative feeling of an individual in carrying out the behavior of a certain thing. Interest (intention to use) is a measure of the strength of interest to perform behavior. While the actual usage refers to the direct use of a given system (Davis, 1989).

The application of digital technology has eight advantages as compared to the conventional way as stated by Traver and Laudon (2014), namely, "1) Ubiquity, using digital technology is available all the time and does not depend on physical tangible places to visit; 2) Global Reach, business transactions using digital technology enable the establishment of cross-cultural trade relations, regional and national boundaries but at a lower, easier, effective and efficient cost; 3) digital technology is Universal standards; 4) Richness, by using digital technology, the financial activities undertaken will be more complex and varied in content; 5) Interactivity, digital technology allows stakeholders to conduct long-distance economic transaction interactions; 6) Information Density, by using digital technology will reduce the operational costs required, as well as improve the quality of information available in terms of effective time, the right amount and accuracy; 7) Personalization and customization, digital technology allows messages to be delivered specifically and can be adjusted to customer orders; 8) Social Technology, digital technology helps stakeholders to foster social interaction among fellow cyberspace communities (Laudon, 2014)."

According to Gardner (2013), there are 8 (eight) potentials based on intelligence as in the following table:

Table 1: Potential Based on Intelligence

Source: (Gardner, 2013)

Because of the meanings and characteristics of the potential that have been clarified, it can be understood that the potential recipients of Zakat are part of the Zakat institution itself, which means that the capacity of institutions to provide good organizational governance and services must be raised in an intelligence manner to increase the possibility of effective Zakat objectives.

The Zakat potential estimation can be used in three (three) ways, namely: 1) Classical Fiqh uses the approximate percentage of Zakat from a point of view ranging from 0.9% to 4.3% of Gross Domestic Product ( GDP); 2) based on the Qardawi measurement by calculating Zakat on revenue from 2.5% of revenue / operating results; and 3) based on the Qardawi version modification by calculating Zakat on revenue from 2.5% of revenue/operating results; and 3) based on the Qardawi version modification.

The calculation of Zakat potential is divided into 3 (three) parts, namely: a) Zakat from the industrial sector and BUMN; b) Zakat from the household; and c) Zakat from savings (Kahf, 1987).

Based on the findings of Mukhlis and Beik (2013), a number of aspects that can affect the potential for receiving Zakat consist of 4 (four kinds), namely: Religious, Social Responsibility, Self satisfaction, and Organization. Furthermore, also explained among the indicators that are able to influence the compliance of paying Zakat are the participation of Zakat management institutions, the professionalism of Zakat institutions, and the management organization that includes the distribution of Zakat, transparency, and social economy.

The growth of the Muslim population is the fastest in the world. In Indonesia, the potential of Muslim population is ranked first. Based on global religious futures data, the population of Indonesia in 2020 is predicted to reach 263.92 million, but the percentage will shrink to 86.39% (Kusnandar, 2019). The great potential of Zakat can also be seen from the level of income of the Muslim population, especially in the productive age between 25-54 years, including based on the "Classification of Indonesian Business Field Standard (KBLI) 2009 which consists of 3 (three major groups as follows: 1) Agriculture consisting in the agriculture, plantation, forestry, hunting and fisheries sectors; 2) Industry, which consists of the mining and quarrying sector, processing industry, electricity, gas, and buildings and 3) Services including wholesale trade, retail, restaurants, hotels, transportation, warehousing and communication, finance, insurance, building rental business and land, social, social and personal services."

Researchers examine more deeply why muzzaki are interested in paying Zakat using digital Zakat, which incidentally is a tool that provides convenience and supports the need for efficient technology in conducting financial transactions as in the theory of the Uses and Gratification Model. Researchers find that this is related to human relations with other humans. They prefer to do social interaction with the surrounding environment as contained in the Philosophical and Ethical Axioms of human relations and the environment in Islamic Economics. First is Tawheed who gave birth to an awareness of overall responsibility to Allah SWT in carrying out economic activities both in doing business, behaving, carrying out social interactions with the community and carrying out God's commands such as the obligation to pay Zakat and be able to understand the economy as an order of worship. Second is the Khalifah as a form of awareness as a representative of Allah SWT on earth who gave birth to an attitude in the fulfillment of the right needs and in accordance with the guidance of the syar'i which prioritizes the benefit of the people. Third, free will (free will) as a form of ability to make the best choice, namely the granting of freedom to choose but still within the limits in value and principles as a khalifah of God. And the last is a sense of responsibility (reponsibility) that is able to give birth to the concept of good deeds (maslahah) for the community which ultimately gave birth to a caring attitude towards the social environment and fostered a sense of voluntary and self awareness to become a better person.

3.3. Dense Settlement Governance

Rehabilitating degraded settlements is a challenge for the specialists and institutions involved, be they municipal governments, national government agencies, state companies, or non-governmental organizations.

IBAM (2002) studied twelve densely populated city improvement programs or property regularization programs and found that the main sources of financing consisted of; 1) city-owned funds (38.9%), including from the City Housing Fund; 2) transfers from the federal budget (6.3%), including funds under the Habitar-BID program; 3) loans from official employee severance funds (local acronym FGTS) and employee aid funds (local acronym FAT) (5.4%); 4) sources of foreign loans (46.8%), particularly Inter-Country Development Bank (IDB) loans; and 5) contributions from bilateral and multilateral cooperation agents (1.2%) (IBAM, 2002). The scope of this program generally uses a basis, usually includes the following points:

a. building water supply and sanitary sewerage networks to service all housing units following the road used by pedestrian and vehicle traffic;

b. road systems to facilitate house-to-house waste collection and access to houses;

c. drainage system, including straightening and covering the flow if necessary;

d. geotechnical construction work, such as a retaining structure on a hillside;

e. installing electricity networks and street lighting;

f. provide waste collection services;

g. maintenance of public and collective spaces that are compatible with the availability of areas internally or adjacent to the center;

h. build at least new housing units in different locations, and examine the possibility of creating new residential areas and relocating houses in the slums themselves;

i. building new housing units outside densely populated areas, to help families relocate or resettle different locations; follow-up social assistance for beneficiary communities to encourage participation at every stage in the program.(Abiko, 2007)

This shows difficulties in construction work due to the characteristics of densely populated settlements (high density and unhealthy settlements, tiled buildings, difficulty in accessing, problems with flooding and low carrying capacity of the land), which also raises costs, even though these items are not measured. From this angle, the relevant points are:

a. difficulties involved in using equipment, requiring vertical transportation, manual digging of trenches and drains;

b. construction work when the family stays in the same location, requiring special tasks and techniques to ensure occupant safety, such as retaining structures and water level drops to allow excavation;

c. the need for ongoing project revisions, given the extreme mobility of families, of those constant extensions or new buildings, and the need for temporary lodging to accommodate families whose homes are affected by work or are found to be at risk of situations that will occur

Next to identify certain key cost factors, it is recommended to use strategies to reduce costs and/or increase the cost/benefit ratio for interventions, also to make use of contributions in COBRAPE (2000):

a. conduct a careful diagnostic analysis covering conditions in the slums and specifically the situation of the surrounding area and the way in which densely populated areas relate to the latter, to estimate the likely costs and on that basis decide on the main path of intervention;

b. re-evaluating the increase in small slums far from urban links (often in Jakarta) of water resources or springs, because interventions involve high costs and encouragement of irregular work in adjacent areas;

c. analyze as special cases slums located along streams or at very disadvantageous locations (topography, stability, soil type, etc.), because these factors will require large amounts of resources;

d. evaluating the possibility of designing executive projects on the construction site itself, in order to efficiently match the dynamics of populated areas and minimize problems that arise beyond the initial costs due to modifications. Project executives will follow the general guidelines and project criteria specified in the basic project.

e. consider the use of network technology using materials that can be transported manually, minimizing connections and improving sealing properties, such as plastic systems;

f. including house facilities in intervention, using prefabricated or pre-assembled components, such as installation kits and depending on location, prefabricated bathrooms;

g. evaluate the possibility of using interlocking concrete beams or asphalt paving blocks, because they are suitable for slopes, are more permeable and can be installed manually;

h. organizing systematic sanitation and environmental education campaigns (after interventions) to improve equipment conservation and prevent further work. Assistance to the community will include - in addition to aspects of urbanization - social involvement, job creation and income, etc.

This final section concludes with a number of recommendations relating to strategies and technology to minimize costs or increase the cost-to-benefit ratio of interventions:

a. improved post-employment performance and evaluation for slums, in the sense of updating project criteria, technology and basic guidelines for interventions, which can help develop a technical project manual for slum urbanization;

b. operational and maintenance costs for equipment and services related to increasing densely populated settlements, that means covering the overall costs of this intervention:

c. monitor project costs using systematic and cost tracking spreadsheets and the continuous collection of life cycle data (conception, implementation, maintenance, and post-work). (COBRAPE, 2000)

The existence of sustainable solidarity is a serious threat in the effort to achieve development goals and this is very regrettable by almost everyone because it can increase economic inequality. Apart from all that, the right strategy must be done in stages and through a series of procedures that cannot be done without the participation of all parties concerned. What is clear, both Zakat digital technology and the management of habitable settlements by the government all correlate with each other. Without good cooperation, and without the right strategy, all of that will only cost a large amount, but with ineffective results. For example, making a set of norms resulting from musyawarah consensus of all stakeholders and implemented in the form of partnerships with local authorities and city residents can be done at the level of densely populated cities. (Milbert, 2006)

The ease with which digital technology will not fully dominate all forms of human activity, especially those related to the sense of 'attachment' that is born from the faith and sense of responsibility among humans as servants of Allah SWT. The basic values of Islamic economics related to creed, sharia and morals are able to give birth to solidarity (ukhuwah) where there is a close bonding relationship with the surrounding environment.

4. Conclusions

From the results of the discussion it can be concluded that the role of digital Zakat technology in economic development is to distribute Zakat for mustahik especially in slums. The densely populated settlement in this study is the pilot of the distribution of Zakat distribution. Although statistically not analyzed the relationship between the potential for Zakat and the level of welfare of densely populated settlements, theoretically digital Zakat can be one of the pillars to achieve community welfare through the distribution of Zakat. As has been explained that it is important to implement the management of densely populated settlements through stakeholder relations. In this case, the Zakat Management Agency is very responsive in handling and responding to various conditions and situations of the poor in densely populated settlements.