Zakat refers to the religious obligation for all Muslim individuals to donate a set percentage of their income each year to charitable causes. Due to the size of the global Muslim population, zakat could play a major role in poverty alleviation in Muslim-majority communities around the globe. Muslims make up about 22% of the world’s population. However, estimates suggest that roughly 35% of the 2 billion people facing poverty worldwide are in Muslim-majority countries. In their 2014 study on zakat, Isahaque Ali and Zulkarnain Hatta reported that over half of the population in Muslim countries are very poor. Further, the regions of the world with the most significant Muslim populations, including Africa and Asia, are facing increasing poverty levels.
What Is the Purpose of Zakat?
Zakat is one of the five pillars of Islam. As such, it is mandatory for all Muslims who have the means to meet their basic annual needs. Zakat is generally set at a minimum amount of 2.5% of income and total wealth. Muslims believe that giving zakat purifies the giver. Megan Abbas, assistant professor of Middle Eastern Studies and Islamic Civilization at Colgate University, spoke to The Borgen Project about zakat.
“The Arabic term ‘zakat’ can be loosely translated as purification, a fact that helps us understand the spiritual components of this practice,” Abbas said. “Specifically, giving zakat is often seen as a way to purify the soul of selfishness and to remind Muslims that their worldly wealth is not really theirs at all but rather exists thanks to the mercy and kindness of God.”
Many Muslims see poverty as both a social and religious problem. As a result, giving zakat aims to alleviate poverty and achieve socio-economic justice. Further, the Quran explains that zakat should reach certain groups of people in need. This includes those who have no or few means of livelihood, zakat workers, new Muslims, those who are indebted, stranded travelers and enslaved people.
“Zakat is also tied to Islamic conceptions of egalitarianism and socio-economic justice because it mandates economic redistribution from the wealthy to the marginalized and poor every year,” Abbas said. “This redistributive function complements other aspects of Islamic economics, including the prohibition on interest-bearing loans and exhortations to engage only in fair and transparent business contracts.”
The Potential Impact of Zakat
Zakat is an underutilized resource for poverty alleviation in Muslim-majority communities and non-Muslim communities around the world. The Guardian reported that zakat is one of the largest redistributions of wealth. Estimates suggest that between $200 billion and $1 trillion goes to zakat annually. In comparison, experts predict that ending global poverty would cost only $175 billion per year for 20 years. As states within the Organization of Islamic Cooperation increase their amount of humanitarian aid to 14%, zakat will rise. As such, the potential of zakat for poverty alleviation in Muslim-majority communities increases as well.
Noor and Pickup of The Guardian believe zakat address the United Nations Sustainable Development Goals (SDGs). This would help meet the $2.5 to $3 trillion annual funding gap to achieve the SDGs. Importantly, this aligns with zakat’s socio-economic goals. The World Bank also acknowledges the potential of Islamic financing to achieve the SDGs. Specifically, zakat can help by closing financing gaps and building affordable housing with the help of technology to organize zakat funds.
How Zakat Can Help Fight Global Poverty
The Guardian reported that only one-quarter of global zakat goes to formal donations. In fact, Muslims give the majority of zakat individually and casually. This leaves an opportunity for a more organized donation system. Such a system could have a greater, sustained impact on poverty alleviation in Muslim-majority communities.
There are a variety of ways to collect formal zakat. One way is through the government, in a system that may resemble a tax or state collection directly from bank accounts. Organized zakat could also go through independent collection agencies specific to a chosen cause. Finally, mosques could collect funds to spend themselves or redistribute to other organizations.
Chloe Stirk of Development Initiatives outlines important steps to increase the impact of zakat. Stirk promotes greater collaboration between humanitarian organizations, Islamic scholars and academics. This would improve collection and distribution as well as increase revenue. In addition, Stirk’s process encourages more tracking and documentation of zakat. This could create a zakat fund, allowing for streamlined distribution locally and internationally. However, the logistical and ideological challenges of streamlining zakat extend beyond the global Muslim community.
In the Journal of Global Entrepreneurship Research, three researchers propose that zakat could best be used in a “small business entrepreneurial framework.” Instead of a zakat fund, they suggest global interest in entrepreneurship to address poverty. Few entrepreneurs in the Muslim world make this an ideal space for development.
Demonstrated Success of Zakat
Case studies on zakat funds show immense success and powerful potential in poverty alleviation in Muslim-majority communities. Indonesia, home to the world’s largest Muslim population, demonstrates this. There, zakat has an estimated value of 1.59% and 3.82% of the country’s GDP. This equates to $13.8 billion to $33.2 billion each year.
Indonesia has already begun to incorporate zakat into poverty alleviation systems with two centralized zakat organizations. As a result, zakat is an essential method of redistributing wealth to support those in poverty in Indonesia. Further, the amount of zakat collected by institutions continues to rise. Indonesia’s success with zakat suggests that this is a promising method of poverty alleviation in Muslim-majority communities worldwide.
– Emily Rahhal