This thesis is describing the poverty alleviation programs in Malaysia and Indonesia with respect to the role of Zakah as an alternative program to eradicate poverty. Currently data show a large number of the poor lives in Muslim majority countries (Ahmed, 2004), while the United Nation Summit had declared to fights against poverty by targeting a halve reduction of people who live in extreme poverty should be met by 2015. However, it is expected that this goals will be achieved at the global level, but at national level, the achievement of this goals may different depend on the poverty condition in each nation.
Therefore, study on poverty alleviation programs in specific Muslim countries is important to know how the contributions of religious institutions to reduce the poor. To complete this objective, firstly, this paper is to examine the conventional approach to dealing with poverty particularly to analyse the role of economic growth in related to poverty and inequality. Then, this research is analysing the role and scope of Zakah in addressing the problem of poverty. Given the pervasiveness of poverty in Muslim countries, it is also important to investigate how Zakah institution can be used in contemporary times to alleviate poverty in both countries.
The result of this study shows that although Malaysia and Indonesia began to tackling poverty in the same period (1970's), Malaysia performed better in terms of reducing the number of the poor. Secondly, strong version of kuznetsian hypothesis did not hold for both countries; the real data could not support this hypothesis as this data could not explained very well in equality in the early stage and latter development. Thirdly, Malaysia has better management on Zakah collection and disbursement, although they manage the institution somewhat different to other Muslim countries. However, Zakah management in Indonesia is essentially successful in terms of the capability of Zakah institutions to create variation in Zakah utilization.