ZAKAT – THE WAY TO ALLEVIATE POVERTY
SHAIKH SALEH ABDULLAH KAMEL
For many years, Muslims have misinterpreted the rules of Zakat and have consistently confined it to a very narrow sphere with regard to both collection and distribution. Such a faulty application and misunderstanding of this important Islamic socio-economic principle has led to the rise of an underprivileged class of Muslims across the Islamic world who are entirely dependent on Zakat as their sole source of income.
Muslims should therefore look carefully at the issue of Zakat with a view to establishing an appropriate position on this question. If they fail to do this, then the trend of an increase in the poor will only continue to hit the Muslim nations.
It has been clearly stated in the Holy Qur’an that the distribution of Zakat is to be made in eight areas. Th e Qur’an makes it clear that Zakat is not ordered only for the poor and disabled Muslims, but has been prescribed in other areas also. Thus, it is important to remember that Zakat was never meant to be merely a charity given by the rich to the poor.
Zakat and Socio-Economic Development
To ensure that Zakat went to all the groups classified in the Qur’an, in the early days of the Islamic state, the distribution as well as the collection of Zakat was a function assumed and carried out by the government.
Looking at Zakat from the source and distribution points of view, there are many positive economic and social effects exemplified in the following points that should be understood by all modern-day Islamic governments:
1. The relatively high rate of Zakat on liquid assets encourages people paying Zakat to employ their wealth in a profitable manner, such as business ventures.
2. The principle of taking Zakat from capital, or from capital gains, or from yields, will lead to:
a) the selection of better, more profitable projects;
b) and greater efforts to ensure that the management remains cost-effective, thereby resulting in a higher rate of profit.
3. Those entrusted with the task of helping Muslims in the proper calculation of Zakat and taking the exact share learn such values as honesty and veracity, which will help in the collection of Zakat.
4. Variation in the amount of Zakat from one field of economic activity to another inspires people to invest their money where the Zakat is taken from the returns only. Accordingly, the wealth is invested in medium-and long-term projects, where it gives more yield and contributes to overall development.
5. Also, variation in the purpose of the investment may enable the same asset to be utilised in different fields, as in the case of shares. If they are held for transfer and are making profits out of these transactions, then Zakat will be taken from the capital and the profit. But it will be taken from the profit only if the shares are employed in long-term projects.
6. The banks may give their depositors opportunity to benefit from this difference in rates of Zakat through the establishment of different types of investment instruments to provide short-medium-and long-term options. Thus, a greater portion of depositors may be directed to long-term investments such as agricultural and industrial projects.
7. The principle of distribution in the place of collection gives those living in rural areas a better chance to benefit from Zakat and to be helped to a level of self-sufficiency.
8. If the distribution and payment of Zakat to the disabled and lower socio-economic sectors is carried out effectively and diligently, it will lead to the creation of effective demand and consequently to more supply, a higher rate of employment, further demand and so on. It will finally lead to economic prosperity and social development, and thus the collection of Zakat presents society with a solution to the dreadful social ills of recession, unemployment and inflation.
The same argument applies to the distribution to other categories entitled to Zakat. However, at the same time, it is important to remember that the share of any Zakat department employees should not exceed 1/8 or 12.5 per cent of the total amount.
International Organisation for Zakat Administration
Bearing these points in mind, I would suggest the establishment of an international organisation to supervise the collection and distribution of Zakat, and so cater for the proper application of this highly important socio-economic instrument.
The International Islamic Relief Organisation (IIRO) is in a position to play such a role. They could operate in conjunction with local relief organisations, that could be set up in all the Islamic states after getting the initial approval of their respective governments.
The local organisations should be a pyramid shape in structure, with the village and district organisations at the base and the country-wide organisation at the top. All of them would be required to be empowered for the collection of Zakat and would be provided with the necessary information about the various sources of income. Relying on such information, the local Islamic relief organisations could advise people on the exact share of Zakat due from every kind of wealth that they possess.
The International Islamic Relief Organisation, as well as assuming responsibility for collecting Zakat, should carry out a study to decide which groups in the Islamic community are eligible for Zakat in the light of the areas prescribed by the Holy Qur’an.
It would also be necessary to prepare training programmes for those who are in need of such a service to find jobs or establish their own business projects. The organisation would also conduct studies on projects that may be financed by Zakat and then follow up their execution to see if they have been properly carried out.
If these organizations are established, and they and the International Islamic Relief Organization takes heed of these proposals, then together they would be making a significant contribution to realizing the true aims of the Holy Qur’an.
Edited By Asma Siddiqi
Institute Of Islamic Banking And Insurance London
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