Zakat Based Economic System: A Solution to Poverty Alleviation

Mohammad Nadimur Rahman*

The word Zakat literally means purification and cleanliness. It is the third pillar of Islam.  It is compulsory for those Muslims whose net wealth exceeds Nisab  – which is the minimum exemption limit for paying Zakat. As Allah (SWT) says in the Holy Quran, “Who do not give the obligatory charity (Zakat), and with regard to the hereafter, they are disbelievers.” (41:7). Most Muslim jurists agree that Zakat is obligatory on every Muslim who has already crossed their teenage life, who is sane, free and own the minimum level of wealth above Nisab. Those who deny doing so are considered the apostate in Islam and will get severe punishment on the Day of Judgment. There is a Hadith the Prophet (PBUH) reported by Muslim where he said, “He who owns gold and silver and does not pay the dues on them, they will be made, on the Day of Judgment, like sheets heated by the fire of Hell.” 

Nisaband rate of zakat

Nisabis the minimum exemption limit of wealth or property- including commodities- of a Muslim on which Zakat is obligatory to be paid. If a Muslim’s wealth or property is equivalent to 595 grams of silver or 85 grams of gold, he is obliged to pay 2.5 percent of this wealth. This type of Zakat is known as Zakat Al-Mal (Zakat on wealth). Similarly, the Muslims must pay Zakat of at least one animal when they have five camels, forty goats and thirty cows. This type of Zakat is known as Zakat Al-Anam (Zakat on livestock). It is also compulsory to pay Zakat on hidden treasure known as Zakat al-Rikaz. If a mine owner discovers gold, iron, silver sulphur, etc., one-fifth of these treasures is payable as Zakat. But those things that do not melt in the fire are exempted for Zakat payment.

There is another type of Zakat known as Zakat Al-Ushr (Zakat on agriculture crops).  As narrated by Abu Sa’id: Prophet (PBUH) said, anything is subject to Zakat on livestock, precious metals and crops that is less than five camels, forty sheeps, and two hundred dirhams of silver or five wasqs of grain fruits or crops.  According to Ibn Qudama, “Five wasqs of grain or dates are considered the minimum because that amount would be the minimum required to sustain a household for a year. On average, people eat one gram or pound of grain per person per day.

Ibn Umar narrated that Prophet (PBUH) said, “On that which is watered by the sky or by springs, one-tenth (i.e. 10%) is obligatory and on that which is irrigated a one of twentieth (i.e. 5%) is obligatory.”  On the other hand, Jabir narrates from the Prophet (PBUH), “One-tenth is obligatory on that which is watered by rivers or clouds, and one-twentieth is required on that which is artificially irrigated.  Therefore, it is clear that one-tenth, which means 10% of the farm holders’ agricultural production, must be given as Zakat Al-Ushr for yield from non-irrigated land. On the other hand, if the cultivation is on irrigated land, then the amount for Zakat Al-Ushr will be 1/20 or 5 percent.

People entitled to receive zakat

Eight groups of people are entitled to receive Zakat. In the Holy Quran. Allah (swt) says, “As-Sadaqah (here it implies Zakat) is only for Al-Fuqara, and Al-Masakin, and Al-Amiluna ‘Alaiha, and Al-Mu’allafatu Qulubuhum, and Al-Riqab, and Al-Gharimun, and Fi Sabilillah, and Ibn Al-Sabil; a duty imposed by Allah. And Allah is All-Knower, All-Wise.” (9:60)

Al-Fuqara:Poor People. They have nothing to fulfil their basic needs.

Al-Masakin:Those who are needy. Their income is below their basic needs, and they have nobody to depend upon.

Al-Amiluna ‘Alaiha:Those who work in Zakat institutions. They are considered Zakat workers.

Al-Mu’allafatu Qulubuhum:Those whose hearts are being reconciled.

Al-Riqab:Those who are the slaves. They have a minimal scope of earnings due to the lack of freedom. They are also constrained to practice Islam. 

Al-Gharimun:Those who can’t pay their debts due to their meagre income and high consumption needs.

Fi Sabilillah:Those who struggle to establish the Islamic way of life, based on Shariah.

Ibn Al-Sabil:Those who are the wayfarers. They are those who are in the middle of travel but need financial assistance to accomplish it.

Zakatas a tool for reducing poverty and income inequality

Zakathas positive impacts on the productivity, investment and savings of a country. It can be distributed among targeted people to change their living conditions to have a minimum level of wealth sufficient for their sustenance. This approach is considered as spending among them directly for necessities.

The Zakat funds can be divided into three categories: Zakat in cash, Zakat in kind, and Zakat in income-generating activities. Zakat in cash can be allocated to those who cannot participate in direct productive activities because of physical, mental or other capabilities that create barriers to work. Zakat in kind can be allocated to those suffering from natural disasters, including floods, cyclones and earthquakes, or to enable them to get free primary education, rural healthcare services, temporary or semi-permanent houses, afforestation, pure drinking water, etc. Zakat in income-generating activities can be allocated to providing vocational training for those capable of working but unable to do so because of the lack of training. Besides, it can be distributed among the poor for microfinance and other investment purposes. Therefore, in distributing Zakat funds for income-generating activities, the targeted people will be those capable of doing physical work but are unemployed (Pramanik, 1993).      

Zakatcan be considered as a Social Insurance Fund. According to Afzal-Ur-Rahman (1980), Bait Al-Maal can act as a cooperative society, an insurance company, and a provident fund for the Muslim community. It is collected from every wealthy member of the Muslim community as a compulsory levy. This fund is utilized for the less fortunate members of the community to improve their living standards. Hence, it can be an additional capital maintained by the community to help the unemployed, the poor, needy, orphans, widows, etc.

Zakathelps the destitute who suffer from natural disasters like cyclones, earthquakes, floods, etc. Usually, the living standards of the poor and needy are meagre. Most of them typically stay in slums. They suffer a lot during the time of natural disaster because of their lower living standards. Most of them become homeless and shelterless when this situation occurs. For instance, when there is a cyclone or an earthquake, their houses can easily be destroyed. Their homes can even be washed away by water during the time of the flood. As a result, they will face the problems of finding food, cloth and shelter. Besides, they may also face many diseases because of a lack of pure water and healthy food. But these problems can easily be solved once the Zakat system is established in society. According to Sulaiman (2008), “The system of Zakat provides regular relief as well as emergency aid.”

Human capital is one of the essential elements for the development of any country. The country needs human resources to run all the skilled and service skilled economic sectors. These sectors include agriculture, industry including manufacturing and nonmanufacturing, and services like education, health, and financial. Among them, the role of the education sector is very crucial. The education sector produces a workforce to work for all sectors, including agriculture and industry. Education is a social investment that plays a vital role in a country’s development in the long run. It produces a skilful, innovative and knowledgeable workforce to play an essential role in the country’s development. However, the education sector has to take several steps to produce human resources for the country. First of all, it ensures that every person must get primary, secondary and tertiary education from different institutions. Secondly, the sector must provide job-training programmes for the employees. This will help the employees acquire the necessary skills to do the job properly in the economic sectors. Lastly, the education sector needs to provide facilities where individuals can get skills and knowledge through practical experience. As a result, the output will be more when they work in different economic sectors (Yusoff, 2011).

In general, the poor and needy are usually deprived of getting education and training. Due to that, they have a limited opportunity to have quality education and to find employment. If Zakat money is distributed among them for education, then the human resources will improve, reducing unemployment. This will help the country to achieve its development objectives. Besides, Zakat money can also be used for teaching facilities. It can be used to give teachers proper training to provide more helpful knowledge to the students.

*PhD Student (Economics), Erciyes University