In contemporary discussions on Islamic Finance, the lack of attention on Zakat is a great shame. It is swallowed up by a pulsing mass of interest in other Islamic finance products, which are arguably less important than Zakat, both in terms of scripture and socio-economic implications. In this spirit, this article will provide a theological and technical definition of Zakat, as well as explaining the usage and goals of it. This article will also serve as an introduction to Zakat, and permit analysis of its socio-economic dimensions.
The theological origins of Zakat
Zakat is at heart a mode of worship and a divinely-ordained right of the poor, manifest through alms-giving from the rich to the poor. Its existence makes most sense when understood under the Islamic theological position of Tawheed, the oneness of Allah, in which Zakat is made mandatory upon every Muslim by Allah.
Indeed, Zakat is a significant mode of worship; it is the third (of five) pillar of Islam, and was deemed as compulsory upon Muslims in the second year of the Islamic calendar with the following verses;
“…and establish prayer and give zakah and loan Allah a goodly loan. And whatever good you put forward for yourselves – you will find it with Allah. It is better and greater in reward. And seek forgiveness of Allah. Indeed, Allah is Forgiving and Merciful.”
Holy Quran, Surah Muzzammil, Verse 20. Translation: Saheeh International
Elsewhere, Zakat is coupled with compulsory prayer in 30 verses of the Holy Qur’an, exemplifying its obligatory nature.
Zakat also comes under the Islamic principle of Takaful – reciprocal social obligation. Hence, Zakat is an altruistic venture. This is supported by the root letters of Zakat which imply purity, integrity, and growth (Cowan, 1994).
1:Technical dimensions of Zakat[i]
The theological and spiritual underpinnings of Zakat entirely underpin the practical manifestation of it. Having considered the former, we can now explore the latter.
Every adult and sane Muslim who possesses above a minimum threshold of net assets over a lunar year must give 2.5% of the monetary value of the assets to destitute Muslims. The minimum threshold mentioned is referred to as Nisaab. The Nisaab level was set by the Prophet Muhammad (peace be upon him) at a rate equivalent to 612.36 grams of silver or 84.78 grams of gold. These amounts are to be valued at the market price of gold or silver; which asset is to be used depends on the assets a person has.
The Hanafi School of jurisprudence opines that Zakat must only be given to those who are underneath Nisaab, whilst the three other mainstream schools of jurisprudence (Shafi’, Hanbali, Maliki) contend that Zakat can be given to any Muslim if they are among the 8 categories of recipients specified in the Qur’an:
“Zakah expenditures are only for the poor and for the needy and for those employed to collect [zakah] and for bringing hearts together [for Islam] and for freeing captives [or slaves] and for those in debt and for the cause of Allah and for the [stranded] traveler – an obligation [imposed] by Allah. And Allah is Knowing and Wise.”
Holy Qur’an, Surah Tawba, Verse 60. Translation: Saheeh International
Therefore, the eight categories of people are; the poor and needy, Zakat administrators, new Muslims or potential Muslims, emancipation of slaves, people in debt, in the path of Allah (this is interpreted in several ways), and the traveller. Other than category four, a recipient of Zakat must be a Muslim, although a minority opinion exists among scholars which argues otherwise.
In the above eight categories is a Zakat administrator, which raises the essential issue of Zakat distribution. Zakat can be distributed by a sane, adult, trustworthy, knowledgeable, and efficient Muslim. They can be entrusted to distribute the Zakat among the needy. In today’s age, many NGOs exist to serve this purpose. A particularly good example of such an NGO is the National Zakat Foundation, a UK based charity which has distributed over £4 million in the UK since its inception in 2011[ii]. It has a particular focus upon local usage of Zakat.
This concludes the technical exploration of Zakat. It should be noted that numerous scholastic intricacies have been omitted to provide an accessible and broad overview.
2: How Zakat can be used
Zakat can be given as much more than a simple monetary stipend. There are many potential uses of it; the National Zakat Foundation offer university scholarships through Zakat. They also lead the ‘Date Palm Project’, which supports prison leavers through housing, counselling, and learning. Further examples of diverse use of Zakat include Peace TV, a popular Islamic TV channel, which partly operates via Zakat funds. Shaukhat Khanum Memorial Cancer and Research Centre in Pakistan also makes heavy use of Zakat funds[iii]. These examples show how Zakat is a dynamic and malleable funding avenue.
Islamic scholarship agrees that local usage of Zakat is the worthiest way of using it. Scholars also remark that if a country is self-sufficient, it is permissible to send Zakat funds abroad for distant use, hence many UK based NGOs collect Zakat funds, and allocate them abroad. However, the existence of an organisation such as the National Zakat Foundation, which prides itself on distributing Zakat in the UK, brings to light an interesting issue; in a developed economy such as the UK, there are a considerable number of people who fall below Nisaab. This suggests that as a definition of poverty, Nisaab can encompass several dimensions of poverty, hence even in an economy as well developed as the UK, a surprising number of people are still eligible to receive Zakat.
Venturing over to the Muslim world, some Muslim countries have attempted to institutionalise Zakat collection and distribution, such as Pakistan and Malaysia. This has been met with varying degrees of success – the reasons behind this will be explored in future articles.
3: The goal of Zakat
The intended result of Zakat is to better wealth inequalities, as can be understood via the saying of the Prophet Muhammad (peace be upon him):
“O Mu’adh! Inform them that Allah makes Zakat obligatory for them. (It is) to be taken from their rich and given to their poor.” [Bukhari]
In this instance, we have the Prophet Muhammad (peace be upon him) send Mu’adh as an emissary to Yemen. Evidently, Zakat was understood as a transfer from the wealthy to the needy.
Additionally, from the verse of the Qur’an that stated the eight Zakat recipients, the first and second categories are the poor and needy. The foremost mention of these two categories indicates that Zakat is also an intended alleviator of absolute poverty.
It is noteworthy that different theories of the result of Zakat exist, as outlined by Shaykh Yusuf Qardawi in his grand primer on Zakat. Each different theory would warrant an extensive discussion on its own, and so it is far beyond the scope of this discussion.
To summarise, Zakat is a transfer of 2.5% of the net assets possessed for a lunar year from every Muslim above the Nisaab level to Muslims who are below the Nisaab level. There are eight specific categories of people to whom Zakat is paid, with a preference being given to local distribution, spare a few caveats. Zakat is far more than a monetary transfer, it can materialise in a plethora of ways that are conducive to societal development. Future articles will seek to explore the socio-economic implications of Zakat.
Given the nature and content of this article, this author had the article checked and approved by a qualified aalim.
[i] Much of this section is based upon the information available on the National Zakat Foundation website.
Nzf.org.uk,. ‘Knowledge – National Zakat Foundation’. N.p., 2015. Web. 7 Sept. 2015. Available at: http://www.nzf.org.uk/Knowledge
[iii] The Islamic Research and Training Institute, Islamic Social Finance Report 2014. p61. Zawya, 2014.