Zakat-Based Welfare and Macroeconomic Stability: An Islamic Approach to Inclusive Development

Abstract

This study investigates the potential of zakat, an Islamic fiscal mechanism, as a tool for promoting macroeconomic stability and inclusive development in Muslim-majority developing countries. It explores the conceptual integration of zakat within macroeconomic frameworks, traditionally dominated by secular public finance tools. Using a theoretical approach grounded in Islamic economic thought, institutional economics, and welfare theory, the paper outlines how zakat functions as a redistributive instrument capable of stimulating demand, reducing fiscal pressure, and supporting equity. Findings reveal that when institutionalized effectively, zakat can operate as a counter-cyclical fiscal stabilizer with high cultural legitimacy. The paper also addresses the legal, institutional, and economic conditions necessary for integrating zakat into national policy. By bridging ethical imperatives with economic rationale, the research offers a novel model for fiscal resilience and inclusive welfare, especially relevant to policymakers and scholars working in Islamic finance and development economics.