The Impact of Implementing Sustainability Accounting Principles on the Effectiveness of Zakat Funds Utilization in Poverty Alleviation: A Modeling Approach Using Hidden Markov Models

Abstract

This study examines whether sustainability accounting practices enhance the efficiency of Zakat in reducing poverty and advancing Sustainable Development Goal 1: "End poverty in all its forms everywhere." A semi-empirical Hidden Markov Model (HMM) is proposed to analyze the dynamic interactions among the integration of sustainability accounting practices (ISAP), institutional efficiency, and welfare outcomes. Panel data from nine Indonesian Zakat institutions (LAZs), collected between 2021 and 2023, are utilized to identify latent efficiency states (low, medium, high) and to examine whether variations in ISAP levels influence efficiency transitions over time. The findings indicate that most LAZs operate in low- to medium-efficiency states. Higher ISAP levels are associated with a greater likelihood of transitioning to higher-efficiency states, underscoring the significant role of sustainability accounting in organizational development. Nevertheless, sustaining high efficiency is challenging due to external shocks and changes in governance. The results suggest that ISAP functions not only as a reporting mechanism but also as a structural driver of organizational change and transformation. This perspective aligns with distortion theory, which links poverty reduction to substantive political reform. The study strengthens the relationship between sustainable accounting and Islamic social finance, adding to the accounting and development literature by showing how religious organizations employ data-driven governance to boost their social and economic impact through Zakat disbursement. These insights are directly relevant to policymakers, regulators, and practitioners seeking to strengthen institutional resilience and develop effective poverty-reduction strategies.

Keywords: Zakat, sustainability accounting, poverty alleviation, Hidden Markov Models, Sustainable Development Goal 1 (SDG 1), Islamic philanthropy.

DOI: 10.7176/RJFA/16-10-06

Publication date: December 30th 2025