INTRODUCTION

TO THE STUDY OF THE ECONOMICS OF ZAKAH

Monzer Kahf

Zakah, the third pillar of the Islamic religion, is probably the first pillar of its economic
system. It represents the first and most important tool of implementing the economic justice and
to provide sustenance to the economically unfortunate, two issues for which Islam is especially
sensitive.
This introduction consists of four sections. In section once, major fiqhi aspects of Zakah
will be briefly mentioned. Section two will provide an update about the implementation of
Zakah in Muslim countries and communities. Section three will present a short overview of the
papers included in this book of readings, and finally, section four will make suggestions about
areas where there is need for further research on the economics of Zakah.

SECTION ONE: MAIN FIQHI ASPECTS OF ZAKAH

The objective of this section is to give a profile of the main issues of fiqh related to
Zakah. It makes an easy and quick reference to the reader and provides a general fiqhi
framework of the study of the economics of Zakah. It should be kept in mind, however, that I do
not intend to survey the fiqh of Zakah in this brief introduction since this is covered by many
other writings and it requires a lot more than an introduction to deal with. This section is
essentially based on the Qaradawi book, Fiqh al Zakah.

1. The obligation of Zakah

To begin with, it is well established that Zakah is one of the most fundamental
obligations in Islam. According to a statement of the Prophet (pbuh), it is the third out of five
pillars on which this religion is founded. That it is an obligation mentioned in the Quran thirty
times, in twenty-eight of which, Zakah is associated with prayers.
Moreover, there are many other verses which mention the term sadaqah and its
derivatives in a general meaning which covers both voluntary contributions as well as Zakah i.e.,
obligatory contribution. In four of these verses, the term sadaqah is used specifically in the
meaning of Zakah1.

1
These are all in surah No. IX, verses 58, 60, 74 and 103. See for details the comments of Ibn Kathir and Abu Bakr
bin Al Jassas on these verses.
 Additionally, two other verses (2:267 and 9:00) refer to the obligation of Zakah using the
term anfaqa and its derivatives2.
This obligation of Zakah is also emphasized in a large number of sayings of the Prophet
(pbuh)3.
The obligation of Zakah is also unanimously agreed upon among all Muslim scholars
without any dissent. This has been so since the era of the Companions of the Prophet (pbuh) and
throughout all the schools of jurisprudence4.

2. Items subject to Zakah

The Quranic reference to items subject to Zakah is rather general. Verse No. 103 of
surah IX mentions the word amwal, and verse 267 of surah II mentions what you have earned
and what we have produced for you from the earth. However, several sayings of the Prophet
(pbuh) make specific reference to gold, silver, camels, sheep, cows, whatever which is prepared
for sale, land produce, crops and fruits5.
On the basis of such texts of Quran and Sunnah, scholars, both classical and
contemporary, formulated many views, opinions and rules about subjecting items of wealth and
income to Zakah. The different positions of fuqaha’ on this issue may generally be categorized
into three main stances as follows:
A. Those who believe that items subject to Zakah are: agriculture products, livestock,
mobile assets acquired for the purpose of resale, gold, silver and other money on
hand.
B. Those who add to the above: return generated by fixed assets and earning of human
capital, be it in the form of wages, salaries or professional income.
C. Those who include in the items subject to Zakah not only these items mentioned in A
and B, but also the fixed assets themselves.

It is also to be noted that in any classification, one loses certain details. Hence, in group
A above, there are many differences about the subjectivity of items such as jewelry, debts on
others, honey, lumber and wood, domestic animals other than livestock, etc. By the same token
within the views in group B, there are the opinions of including gross or net return of fixed assets
among the items subject to Zakah.

2
See the respective comments of Ibn Kathir and Al Jassas on these two verses.
3
Yusuf al Qaradawi, Fiqh al Zakah, (Arabic), 2nd ed., Mu’assat al Risalah, Beirut, 1393H, V. 1, pp 69-75.
4
One finds this at the introduction of the chapter on Zakah in all the classical works on fiqh.
5
Al Qaradawi gave an excellent survey of the texts of the Quran and the sayings related to these items; refer to the
relevant sections of chapters 1-5 of part III of his book.
3. Conditions for subjection of a property to Zakah.
3.1 Conditions related to the Zakah payers.
With regard to Zakah payers, there are two conditions. First, a payer of Zakah must be
Muslim. This is based on the fact that Zakah is one of the worships in Islam and acts of worship
address only believers and followers of this religion. But it is to be mentioned also that Zakah is
a financial duty as well, and it is to be collected by the government. Hence, this condition may
create a discriminatory situation against Muslims in all societies which have Muslims and non-
Muslims in their population. This urged some scholars (e.g. al Qaradawi) to call for imposing an
equalizing tax on non-Muslims under the name of social solidarity tax, the proceeds of which are
to be used for the same objectives as Zakah but for the non-Muslim community in the same
country6.
Second, there is the condition of being qualified for an act of worship. This means that a
Zakah payer should be a sane adult, (children below the age of puberty as well as insane adults
should not be subject to Zakah). Here again, this condition is challenged on the ground that
Zakah is a financial obligation which must related to wealth and income more than the status of
the owner. Additionally, there are several sayings from the Prophet (pbuh) and some of his
companions indicating that a child and an insane adult are both subject to the payment of Zakah
and that it must be paid by their respective guardians7.

3.2 Conditions related to Zakah items.

As for the conditions related to the items subject to Zakah, Muslim scholars usually talk
about five requirements as follows8:
1) Ownership: This means that for an item to be subject to Zakah, it must be owned by the
potential payer. This ownership must be absolute and not restricted (except, obviously as the law
provides) so that it gives the owner all the power he/she is entitled to by the law. The
requirement of this condition is founded on the fact that all verses which mention the obligation
of Zakah talk about it being levied on items owned by the potential payer.
The implications of this condition are interesting. They include that items not owned by
any human being are excluded from being subject to Zakah. These include property of the state
since it belongs to the whole Ummah and no one in particular has a right of ownership over
them. They also include the property of charitable awqaf (trusts) since such property is not
owned by anyone.
This condition also implied that any property which is unlawfully acquired or obtained is
not subject to Zakah, since whoever possesses it is not its right owner on the one hand, and on
the other hand, whoever legally owns it, has no access to it.
2) Growth: This condition means that for an item to be subject to Zakah, it must be either a
growing one or itself a result of a growth process.

6
Al Qaradawi, pp. 97-104.
7
Ibid, pp 105-119.
8
The presentation of these conditions is fully based on al Qaradawi, Ibid., pp. 123-166.
 A growing item is that item whose nature is to grow and increase such as camels and
cows or merchandise set for sale. Money (including gold and silver) is also considered growing
as it is usually made to grow through exchange. It is, therefore, considered by Muslim scholars
as potentially growing though not physically.
This condition is derived by surveying all the items made subject to Zakah by the Prophet
(pbuh). Using this criterion of growth, scholars were able to judge the subjectivity of new items
which are not mentioned by the Prophet (pbuh) to Zakah.
This application of this criterion takes out of Zakah things like property to which the
owner has no accessibility, e.g. retirement fund or treasure buried but its whereabouts are
unknown. Also excluded are assets maintained for use and acquisition purposes and not for
growth purposes, such as property for personal and family use.
3) Nisab (minimum exempt or criterion of zakatability): In several of his sayings, the
Prophet (pbuh) set certain minimums for different items and exempted anyone who owns less
than the minimum of the payment of Zakah. However, once a person owns the minimum of an
item, the whole amount of that item becomes subject to Zakah.
Called Nisab, these minimums are: 5 camels, 30 cows, 40 sheep, 5 wasq (equals 653
kilos) of agricultural products, 200 dirham (a currency-cum-weight unit equals 2.975 gram) of
silver, 20 dinar (a currency unit equals 4.25 gram) of gold and an amount equal in value to the
Nisab of silver or gold for all other items.
4) The amount of Nisab must be over and above what is required to satisfy basic needs and
to pay immediately due debts: In addition to the minimum exempt, Shari’ah perceives that for an
item to be subject to Zakah, it must not be preoccupied by the basic needs of the owner and
his/her family. In this way, apparently, the Zakah institution takes consideration of the personal
and family needs of the payer.
According to many Muslim scholars, basic needs cover biological as well as social and
religious requirements for normal living without hardship. This includes food, medicine,
clothing, shelter, furniture, tools of craftsmen, transportation, and books for a student or scholar.
On the other hand, the concept of extended family applies in this regard, i.e., family
whose basic needs are considered includes: wife, children, parents, and any other relative for
whose expenses the payer is responsible in accordance with Shari’ah.
Additionally, if the payer is under debts which are due in such a way that payment of
these debts will have to be made out of the present assets, the amount of the debts should be
deducted from the assets before they are subjected to Zakah.
5) Passage of one year: Zakah is a yearly obligation. Therefore, if an item was subjected to
the payment of Zakah on a certain date, there ought to pass one year before another payment of
Zakah becomes due. The ultimate result of this condition is that no two payments of Zakah may
be effected during one fiscal year. The fiscal year of Zakah is lunar.
This condition is justified by a saying of the Prophet (pbuh) which states that no Zakah is
obligatory on any property until one year passes9. This also implies that once a person owns a

9
Ibid., pp. 162-163
Nisab of an item, then Zakah is sue only after one year passes and that minimum amount is still
owned by that person.
However, some Muslim scholars argue that this condition only applies to items in stock
and that earned items are subject to Zakah when they are obtained as long as they fulfill other
conditions mentioned above.

4. Distribution of the proceeds of Zakah

The Prophet (pbuh) is reported to have said: “God verily did not accept the judgment of a
Prophet or anybody else in [the distribution of] Zakah, so He gave the judgment on it. He
divided it into eight parts.10” This saying refers to Verse 60 of Surah 90 which reads: “Sadaqat
are for the poor, and the needy, and those employed to administer [the funds], and those whose
hearts been reconciled [to the truth], and for those in bondage, and those in debt, and in the cause
of Allah, and for the wayfarer; [thus is it] ordained by Allah, and Allah is full of knowledge and
wisdom.11”
Consequently, Zakah proceeds should be distributed to these eight categories or
recipients as mentioned in this verse12.
The first two categories are very often discussed together since they are close to each
other by definition. Some scholars define the poor as a person who has less than his needs in
terms of wealth and income, whereas the needy is that who owns nothing. Some others,
however, consider that the poor is in a worse situation than the needy. But really it is
immateriam who is in a worse condition. What matters is that both the poor and needy cannot
support all their needs by their own means that they require supplementary support for
sustenance.
These two categories make up the main recipients of Zakah and they must be paid as
much as required to satisfy their needs provided there are sufficient funds.
The third category is those employed to administer the funds of Zakah, i.e., those
working in the collection and distribution of Zakah. Here there is a clear reference that Zakah is
in principle a function of the Islamic government for which there ought to be an autonomous
organization within the structure of the government. In this regard, Muslim scholars discuss the
qualification of Zakah workers. They argue that the Zakah workers should be Muslim, adult,
sane, knowledgeable of the Shari’ah rulings on Zakah, suitable for the kind of job assigned to
them. Payment to this category must be in accordance to their performance, efficiency and
market rates of wages and salaries.
The fourth category of recipients consists of those whose hearts are reconciled to the
Islamic religion. It includes people who recently embraced Islam, people who are expected to do
so, and people whom by giving them you may expect to benefit the cause of Islam by avoiding
the evil and harm they would otherwise do or increasing their benevolent action.

10
Ibid., p 542.
11
Translation from Yusuf Ali.
12
The presentation of the categories to whom Zakah proceeds are to be distributed depends on part 4 of al
Qaradawi’s book, Ibid., pp. 544-744.
 Zakah payment to this category can be done only by the Islamic government, i.e., when
Zakah is collected and distributed by the authority. If, in a Muslim country, the government does
not take up this function, individuals cannot pay to this category when they dispose of their own
Zakah13.
The fifth category is to liberate slaves by purchasing them from their masters and setting
them free as well as by helping those among them who have initiated a self liberation agreement,
called mukatabah, with their masters. Such an agreement usually stipulates that a slave would be
permitted to work on his/her own, pledge a certain amount of money to be paid to the master on
installments and the slave would be free upon completion of all the installments.
Several contemporary Muslim scholars argue that since slavery does not exist any more
in today’s world, this part of Zakah distribution should be used to spend on supporting the
struggle of colonized peoples to gain self-determination, especially if these people become
Muslim14. This share may also be used to ransom Muslims who fell in captivity as prisoners of
war in the hands of the enemy.
Helping those under debts is the sixth category of the potential recipients of Zakah.
Debts included here are those which may arise from natural catastrophes, business practices or
borrowing to spend on family needs.
Debts may also arise from reconciling differences, disputes among individuals,
communities and tribes, especially disputes caused by killing and revenge whereby those who
mediate in the reconciliation may accept to carry the responsibility of blood money. By the same
token, debts on deceased persons may also be paid out of Zakah proceeds.
Only unlawful causes of the debt such as gambling or drinking deprives debtors from
being helped under this category.
When debts are caused by payments for reconciliation of tribal and community disputes,
payment out of zakah to debts-burdened mediators may be done regardless of their wealth.
Al Qaradawi argues that this category opens the door for the provision of loans out of the
proceeds of zakah to those who may need as a temporary relief15.
Zakah may also be spent in the way of Allah. This is the seventh category of recipients.
The way of Allah is obviously a very wide cause, so Muslim scholars have three main views in
defining this category.
Some of them believe that this category covers any act of general service to Islam as a
religion and to the Muslim community. This includes building bridges, creating parks, supplying
street lights, building mosques and other construction of benefit to the whole community, etc.
That is in addition to activities aiming at spreading Islam among non-Muslims and defending its
land and people.
Some other scholars restrict this category of recipients to the fighting against unbelievers
in a war considered permissible in accordance to Shari’ah. Furthermore, zakah payment may
only be given, under this category, to volunteers but not to the regular army which should be
financed by other financial resources of the Government. However, in defensive circumstances
13
Ibid., p. 608.
14
Ibid., pp. 620-621.
15
Ibid., p. 634.
with insufficiency of other financial resources, the rich among the Muslims should be charged
the responsibility of financing army needs and if this did not do the job, then zakah proceeds may
be utilized16.
Yet, another opinion takes a middle of the way position, arguing that the phrase “in the
cause of Allah” includes fighting for the sake of Allah as well as such activities that contribute to
the prosperity of the Islamic religion and to making it known to non-Muslims by the way of
writings, publishing, broadcasting, etc., as long as such activities aim at making the “World of
Allah” supreme and most predominant on earth.
Helping wayfarers is the final category of the recipients of zakah. A wayfarer is a person
who is away from his/her homeland and has no accessibility to his/her wealth and property and at
the same time is in need for financial help in order to reach his land, i.e., although he/she may be
rich in his/her own place, but at the present time, while he/she is away and has no access to what
he/she owns, is considered deprived.
The help a wayfarer needs is an amount sufficient to make him/her reach home. Muslim
scholars usually put an important condition on this category of recipients that the journey
undertaken by such a person must not be for a bad cause.
Lastly, there are a few remarks which deserve to be mentioned in regards to distribution:

a- The role of the government in regards to the collection and distribution of zakah is
essential. The Qur’anic verse IX:103 is addressed to the Prophet (pbuh) as a head of the
state and ordained him “take sadaqah out of their property.” The verse IX:60, which
stipulates the distribution, mentions the workers on its collection and disbursement as one
of the categories of the recipients of its proceeds. This clearly indicates that zakah is not
to be handled by the payers individually but by a government agency which hires its own
employees. This principle is emphasized very much by several sayings of the Prophet
(pbuh) and by his own practice during his reign as head of the state in al Madinah as well
as by his four Successors after him.
Until the end of the Ottoman empire, it was the tradition of Muslim governments
throughout the history to assign a special fund or account in the treasury for zakah so that
its proceeds are distributed in accordance to the Shari’ah requirements. This is also the
position of Muslim scholars in their writings from Abu Yusuf’s Al Kharaj to Ibn Abidin’s
Al Hashyah17.
On the other hand, the state may delegate individual payers to dispose of their own zakah
to proper recipients as long as it is generally known that individuals are keen to pay it out
of their religious enthusiasm.
Lastly, it must be noted that the obligation of zakah is not affected if governments neglect
it. Individual Muslims remain religiously obligated to give away their due zakah by
distributing it directly or through charitable voluntary organizations.

16
Ibid., p.641.
17
Ibid., p. 757.
 b- According to the majority of Muslim scholars, zakah may be given to anyone in any of
the eight categories mentioned above. An individual payer of zakah may give his/her due
zakah to one deserving person or more in one or more of these categories. General
wisdom and applying one’s best judgment in order to maximize the benefit of zakah
payment is always applicable as this is a general requirement in all actions of any
Muslim18.
c- Certain kinds of people are excluded from the payment of zakah. These include the
following: 1) A person who is capable to work and earn his/her livelihood but does not
want to do so; 2) Unbelievers and enemies of Islam and Muslims; 3) Close relatives of
the payer for whose provision the payer is responsible. It is unanimously agreed upon
that these include parents, wife, male children under the age of puberty and unmarried
female children. However, some scholars include in this group all relatives who may be
heirs if the payer dies. 4) Descendents of the family of the Prophet (pbuh). This is based
on several sayings by the Prophet (pbuh) preventing his family from taking zakah and
any charity19.
d- Permissibility of cash payment instead of payment in kind is disputed among Muslim
scholars. The majority’s view is that it is permissible as long as it is more convenient or
in the public interest20.
e- In principle, the proceeds of zakah should be distributed within the same area where they
are collected, although there are differences about the geographical definition of a zakah
area. However, it is unanimously acceptable to transport the proceeds of zakah from one
area to another if it is established that potential beneficiaries in the collection area are
fairly satisfied and that if government actually takes charge of the collection and
distribution of zakah it may transport the proceeds as long as it is in the public interest.
On the other hand, an individual payer may also transport a payer’s own zakah in order to
respond to a more dire need or to give it to a relative (provided that relative may become
a recipient of the payer’s zakah as mentioned in © above21.
f- It is permissible for the government to collect the zakah in advance before its due date or
to delay it until a later date if any of these is warranted by the interest of the public22.
However, if individual payers are disposing of their own zakah, the view of most scholars
is that it may not be delayed without a good reason, while it may be paid in advance23.

18
Ibid., pp. 686-694.
19
Ibid., pp. 700-739.
20
Ibid., pp. 799-808.
21
Ibid., pp. 809-820.
22
Ibid., p. 828.
23
Ibid., p. 822-830.
 SECTION TWO: IMPLEMENTATION OF ZAKAH IN
MUSLIM COUNTRIES AND COMMUNITIES

This section intends to provide an update on the contemporary implementation of zakah.

There is no doubt that the economics of zakah can only be meaningful if zakah is implemented in
Muslim countries. Moreover, a good part of the economics of zakah deals with the
macroeconomics, and the zakah implementation by government is a prerequisite for it.
Since zakah was first implemented in the year two of Hijrah (the migration of the
Prophet, pbuh, from Makkah to Madinah), its implementation continued to be one of the
functions of Muslim governments throughout the history of Islam. It remained so during the
Ottoman empire until its fall after the first world war. Yemen is probably the only Muslim
country in which the government has retained the task of collecting and distributing zakah
without interruption since it was imposed by the Prophet (pbuh)24.
In addition to Yemen, five other Muslim countries enacted laws imposing zakah on an
obligatory basis. These countries are: Saudi Arabia, Malaysia, Libya, Pakistan and Sudan.
Several other countries established government organs to collect and distribute zakah without
making its payment to these bodies obligatory. This section is a brief exposition of the
implementation of zakah in the first six countries that made its payment obligatory to a
governmental organization, and in some of the other countries in which zakah is paid voluntarily
to the government.

A. Zakah implementation under obligatory payment to the

government.
Zakah in Yemen has been collected and distributed by the government since the arrival of
the first Muslim governor, Mu’adh, who was sent by the Prophet (pbuh) around the year 9 of
Hijrah. Zakah on agricultural products, livestock, stock of trade and money is collected regularly
by a government directorate called “the Agency of duties.” This agency also collects the zakah
of al fitr (breaking the fasting) at the end of the month of Ramadan.
The distribution of zakah in Yemen is done through the relevant headings in the general
budget. Hence, several ministries, including those of social welfare, health and education are
involved in the distribution25. Committes, which consist of government officials are usually
involved in the collections, and cooperatives and local, non-governmental committees are also
involved in the distribution of zakah in Yemen26.

24
Muhamma Yahya al ‘Adi, “Zakah management and application in contemporary Yemen,” (Arabic), paper
presented at the Third International Conference on Zakah, Kuala Lampur, 19-22 Shawwal 1410, P. 6 of the Arabic
text.
25
Monzer Kahf, “Modes of collection and distribution of zakah in Muslim countries and communities,” (Arabic),
paper presented at the Third International Conference on Zakah, Kuala Lampur, 19-22 Shawwal 1410, P. 27.
26
Ibid., p.27.
 Saudi Arabia reintroduced the System of Zakah in 1951. Zakah in Saudi Arabia is levied
on agricultural products, livestock, stock of trade and other mobile business assets and on the
income of certain professionals such as physicians, lawyers, civil and other engineers, real estate
agents, taxi and truck drivers, TV program producers, etc. zakah of al fitr and zakah on monetary
assets other than those which are part of business mobile assets are not collected by the
government.
The collecting agency in Saudi Arabia is an administration within the ministry of finance
called the Agency of Zakah and Taxes. However, for the collection of zakah on agriculture and
livestock, there are special committees consisting of officials from the ministries of finance and
interior and relevant governorate.
The distribution of zakah is done by means of the general budget through the ministry of
labor and social welfare. Two kinds of disbursements are given by this ministry: regular
periodical subsidies to poor families and ad hoc emergency subsidies in case of illness, death,
accidents and other calamities27.
The political structure of Malaysia has its stamp on the administration of zakah in the
country. Zakah, as one of the religious affairs, is considered a function of the state government
and there is a little advisory role only played by the federal government. Most of the Malasian
thirteen states have councils of religious affairs that administer the collection and distribution of
zakah all over the state territory.
State zakah laws in Malaysia provide for obligatory payment of the zakah of al fitr and
the zakah on agricultural products, especially padi, stock of trade, savings, other wealth items
and recently salaries28. However, since these laws do not authorize the administrators of zakah
accessibility to necessary information about the assets and incomes of potential payers and do
not impose sufficient penal measures, the actual payment of zakah on business, savings, wealth
and salaries takes only a voluntary form29.
Zakah in Malaysia is collected by special workers who may be assigned this job on a
permanent or temporary basis, offices of zakah which are affiliated with state councils of
religious affairs, or deducted by employers out of due wages of those employees who
specifically authorize such a deduction30.
The distribution of zakah covers theoretically all the eight categories of recipients but
actually the two categories of those in bondage and those in debts are absent from distribution31.
The share of workers is paid on the basis of one eight of the total proceeds collected by them and
the administrative expenses of the councils of religious affairs are often partially covered from
zakah32.
Libya issued its Zakah Act on October 28, 1971. It provides for the collection of zakah
on livestock and agricultural products. Hence monetary assets are not made subject to obligatory

27
For zakah collection and distribution in Saudi Arabia, see Abd al-Aziz Jamjum, “Zakah application in Saudi
Arabia,” paper presented at the Third International Conference on Zakah.
28
Aidit bin Ghazali, Jamil bin Osman and others, “Zakah: a case study of malaysia,” paper presented at the Third
International Conference on Zakah, pp. 19-23.
29
Ibid.
30
Ibid., p. 17.
31
Ibid., table 14, p. 103.
32
Ibid., p. 23.
levy, and unlike Saudi Arabia, the Libyan law does not impose zakah on business mobile assets.
The law established a General Directorate for Zakah which is charged with its collection only,
whereas the distribution is left to the social welfare department. The law, however, stipulates
that 50% of the proceeds should be designated to the poor and needy and no more than 10% to
the workers of the directorate, while the share of heart reconciliation, wayfarer and in the cause
of Allah is determined at 30% and is to be used by the organization of Islamic Call, a semi-
government body specialized in servicing the Islamic cause outside Libya33.
Pakistan’s Zakah and Ushr Ordinance of 1981 imposed zakah in this country and
established the administration of zakah, which is affiliated with the ministry of finance. The act
imposes zakah on 11 items of wealth, which include savings and time deposit accounts,
insurance policies, debentures, post office savings accounts, shares of common stock companies,
etc., in addition to agricultural products. Stock of trade, business assets, money on hand and in
demand deposits, deposits in foreign currencies, and livestock are all left to what the act called
schedule two where zakah is not collected in an obligatory manner.
The collection of zakah is actually done through collecting agencies. The act requires
parties other than the zakah payers such as banks, common stock companies, post offices and
insurance companies, etc., to deduct the due amount of zakah out of the assets subject to zakah
which they hold for their customers and shareholders. Consequently, there is no direct contact
between the administration and the payers in Pakistan.
On the other hand, the collection of ushr (zakah on agricultural products) is left to the
local committees. These committees are established by law for the collection of ushr and for the
distribution of the proceeds of both ushr and zakah on the rest of the 11 items. Committees are
established for small communities, usually 1000 to 7000 people each. They are supplied with
funds, controlled and supervised by the administration of zakah. All committees consist of
volunteers who are selected for a 3-year term in a public gathering usually held in the mosque.
In regards to distribution, the law stipulates that the only category to receive zakah is the
poor and needy. All other potential recipient categories are not provided for in the law. The
distribution of the proceeds of zakah is done through two channels: local committees and
distributing agencies. Certain proportions of the funds collected through collecting agencies,
usually one half, is divided among local committees for their distribution to the poor and needy
in their respective areas. Distributing agencies are charitable organizations which take care of
poor and needy people, schools and universities for poor students, hospitals and governmental
clinics for ill poor persons, orphanages, and some training centers.
The central and provincial administrations of zakah are charged with the responsibility of
supervising the collection, distributing funds to local committees and to other distribution
agencies, and supervising these committees. This model of collection and distribution proved to
be advantageous in terms of reducing the administrative burden of the bureaucracy and in
involving a large number of volunteers in the work of zakah. Consequently, the size of the

33
The Zakah Law of Libya, Proceedings of the First International Conference on Zakah, Kuwait, May 1984,
Published by the Kuwait Zakah House, pp. 132-148, and Muhammad ‘Uglah, “Historical and Contemporary
Applications of Zakah,” in the same proceedings, pp. 173-270.
central and provincial administrations of zakah is rather small relative to the amount of service
performed in the collection and distribution of zakah and the number of poor people reached34.
Sudan’s first zakah law came in the year 1980, and it provided for voluntary payment of
zakah to a “Zakah Fund” which was established by the act itself. In 1984, a new law was
enacted making the payment of zakah obligatory to the budget of the state, the name of
Directorate of Taxes was changed to become “The Chamber of Zakah and Taxes” and most taxes
were abolished on an assumption that zakah will make a substitute for them. This act was
revamped twice, in 1986 and 1990, in order to take its present form.
Zakah in Sudan is obligatory on livestock, agricultural products, stock of trade and other
business mobile assets, monetary and financial assets, wages, salaries, professional income and
other forms of earnings. In this respect, it represents the most comprehensive experience in the
contemporary application of zakah. Similar to Yemen, zakah in Sudan covers all Muslims,
Sudanese or otherwise, who own assets or earn income in the country and exempts all non-
Muslims regardless of their citizenship. Established by the law, the newly founded zakah
chamber is affiliated with the ministry of religious affairs and is charged with the responsibility
of the collection, management and distribution all together.
The law also equipped the zakah chamber with large authority and accessibility to
documents and records of payers in order to discharge its assignments. However, the actual
implementation of the law depends on many elements which are related to the vastness of the
country, available infrastructure, the size and growth of the chamber itself, social structure of the
Sudanese society, and the economic and political stability of the country.
Accordingly, collection of zakah on livestock is supposed to have started only in 1991,
and until the end of 1990 the chamber did not have its complete facilities in several of Sudan’s
eight provinces (even with the exclusion of the three southern provinces where are still military
actions), and until 1990, most of the revenues of the chamber came from the zakah on agriculture
in the eastern and central provinces.
In the distribution process, local committees of volunteers are involved. These
committees prepare lists of the poor and needy in their areas but actual payment of the subsidies
is usually done by the offices of the chamber. However, zakah is distributed to all eight
categories of recipients mentioned in the verse IX:60 of the Qur’an and all disbursement is now
done by the Zakah Chamber itself.
Lastly, the zakah act of 1990 established a Shari’ah board which is to be consulted on
issues related to religious opinion on the collection and distribution of zakah35.

34
For more information on the application of zakah in Pakistan, see Parvez Ahmad Butt, “Zakah Collection: A Case
Study of Pakistan,” paper presented at the Third International Conference on Zakah.
35
Muhammad Ibrahim Muhammad, “Practical in the collection of zakah: a case study of Sudan,” paper presented at
the Third International Conference on Zakah.
B. Application of Zakah without obligatory payment to the
government:
Several Muslim countries established governmental specialized institutions or funds for
the collection and distribution of zakah. Among these countries are Kuwait, Jordan, Iraq, Oman,
Qatar, Bahrain, Bangladesh and Indonesia. In Egypt, Nasir Bank, which is a government bank
has a big department for zakah. Additionally, in every Muslim country and community you
would find a number of voluntary and charitable organizations which collect and distribute
zakah.
The zakah act in Jordan was issued is 1978. It provides for the establishment of a Zakah
Fund affiliated with the Ministry of Awqaf and to which zakah may be paid by whoever “wishes
to do so.” To encourage people to pay to their zakah to the Fund, the law exempts 25% of the
zakah paid to the Fund from income tax by allowing its deduction from taxable income. In a
1982 amendment, this proportion was raised to 100%. Proceeds of the Fund, which also accepts
charitable grants, are to be used exclusively for the poor and needy and needy wayfarer, and no
more than 10% of it may be utilized for the administrative expenses of the Fund36.
Bahrain’s law of zakah was enacted in 1979. Its main features are similar to those of
Jordan37.
The Islamic Foundation of Bangladesh accepts and distributes zakah among its other
functions in servicing the Islamic cause in the country. However, in terms of volume of
activities and coverage of services, the most significant experience of voluntary-zakah based
institutions are those of the Nasir Social Bank of Egypt, established in 1971, and the Zakah
House of Kuwait, established in 1982.
Nasir Social Bank of Egypt aims at improving social solidarity among people by
mingling together social and economic activities. It provides loans to small businesses and to
individuals. It also distributes grants and help to the poorer segments of the society. Founded in
1972, the bank’s large department of zakah accepts zakah from the rich and distributes it to the
poor. It runds its work with the help of about 4000 local committees of volunteer workers who
are engaged in the search for venues, programs and projects for using the proceeds of zakah in
their actual distribution. These local committees cover most of the country and are located in
mosques, schools and universities, places of work, social clubs and charitable organizations. The
range of their activities runs from helping poor nursing women to meeting the cost of funerals
and burial of the deceased. They have established training centers in order to help the poor and
needy find employment, orphanages, elderly shelters, tutoring poor school and university
children and physical distribution of food and clothing.
On the resources side, the bank accepts zakah payments from individuals and companies.
It also receives grants and donations from the same as well as from the public sector’s enterprises
at the rate of 2.5% of their profits38.

36
Muhammad ‘Uqlah, Op.Cit. pp. 246-248.
37
Ibid., p. 248.
38
Muhammad Mahmud Zaghlul, “Acceptance and distribution of zakah: the experience of Nasir Social Bank,”
paper presented at the Seminar on Zakah, Khartoum, 19-30 May, 1990, and sponsored by the Islamic Research and
Training Institute and the Chamber of Zakah of Sudan.
 Kuwait established its zakah House by Act No. 5 of 1982. The House depends on two
main sources of finances: zakah and donations accepted from individuals and companies who
wish to pay their zakah to the House, and an annual government grant. Additionally, as the
House is affiliated with the ministry of Awqaf and Religious Affairs, all its administrative
expenditures are carried out by the general budget of the government.
Realizing that its future growth depends on increasing its financial resources, the House
took rigorous advertisement policy and introduced information about its benevolent activities to
most of the potential payers of zakah. It also worked hard on creating awareness about zakah in
the Kuwaiti society by means of publication of pamphlets and booklets, advertisements in new
papers, posters, radio and TV, and personal contacts. This enabled the House to triple its
revenues between 1982 and 1989 in spite of the reduction in the government grant39.
The distribution of its proceeds is done within the country as well as overseas, and the
kinds of programs cover regular and ad hoc assistance to the poor and needy, loans without any
charge, in kind distribution of food staff and clothes, poor student stipends, assistance to families
of incarcerated persons. Their projects abroad include distribution of sacrificial meat in poor
Muslim communities, sponsoring orphans and orphanages, establishment of schools, digging
wells in poor dry areas, establishment and running of medical clinics, etc., and their activities
reach out to several Muslim communities in Sudan, Lebanon, Palestine, Burkina Faso,
Philippine, Afghanistan’s refugees, Pakistan, Bangladesh, Somalia, etc40.
In addition to government institutions, one finds in almost every Muslim community, in
the Muslim as well as in the non-Muslim countries, certain voluntary organizations which accept
zakah and distribute it to some of its recipients especially the poor and needy. As an example of
these communities, zakah organizations in India were selected for a presentation in the Third
International Conference on Zakah held in Kuala Lampur, May 1990.
In addition to the individual, private, direct distribution of zakah by payers, three forms
of collective management of zakah exist within the Indian Muslim community. First, zakah is
collected and distributed by the religious schools (dini madaris). According to Faridi, this source
of revenue of dini madaris represent 40% – 50% of their total revenues41. The dini madaris
survive on donations and contributions given by members of the Muslim community. They use
their revenues to pay for their expenditures which usually include full lodging, boarding and
clothing of their students and in most of the times their teachers and staff too.
Second, organizations of a general Islamic nature which are active in the general call to
Islam also collect and distribute zakah. An example of this kind of organization is the Jamaat-e-
Islami whose activity is spread all over the Muslim community of India. About 5% – 10% of its
income is generated from zakah. However, Jamaat-e-Islami has many affiliated institutions and
societies which are specialized in services like charitable hospitals and clinics, orphanages, social

39
Abd al Qader al ‘Ajil, “Study of zakah institutions’ activities: case of the Kuwait Zakah House,” paper presented
at the Third International Conference on Zakah, p. 5.
40
For details of the activities of the Zakah House, refer to al ‘Ajil, Ibid.
41
F. R. Faridi, “An analysis of Zakah System in India,” paper presented at the Third International Conference on
Zakah.
services, rehabilitation and cooperative credit. These societies and institutions are also involve
din the collection and distribution of zakah42.
Third, organizations specialized in zakah collection and distribution were created in
certain areas in India. Some of these organizations attempt to enlarge the geographical scope of
their activities to cover the whole Muslim community in the country. Examples of these
specialized organizations are Baituz zakah of Bombay and Crescent Charitable Trust of Aligarh.
Both of these organizations accept zakah given to them by individual Muslims and distribute
them to the poor and needy. A major part of their distribution is done in kind, i.e., in terms of
medical provisions, clothing, housing and rehabilitation works such as simple tools of trade,
repair of houses, marriage of poor girls, and provision on education43.

SECTION THREE: ECONOMICS OF ZAKAH:

OVERVIEW

Skipped

SECTION FOUR: FUTURE STUDIES ON THE

ECONOMICS OF ZAKAH

Having a grasp of the major writings on the economics of zakah, it is useful to conclude
with some projection and hope of the direction of future studies and research on the subject.
Although it may be irrational to claim that there is a sufficient body of knowledge on
theoretical analysis of the place zakah occupies in an Islamic economy, it may be justified to
allege that the already accumulated amount of theoretical research on the economics of zakah
warrants launching serious applied and empirical studies and analyses on the actual application
of zakah in those Muslim countries that have enacted laws incorporating zakah in their fiscal
systems.
Such empirical and applied analyses would essentially help in testing the hypotheses
provided by theoreticians and hence open new directions for further research. Additionally, only
an empirical examination of the existing body of theoretical knowledge would, in the final
analysis, be able to challenge the wide variety of fiqhi opinions on issues related to nisab,
zakatability and applicable rates on new items of wealth and income.
For instance, it would be very important to analyze the reasons behind the gap between
the theoretical estimation of the proceeds of zakah in certain countries and the actual amount
collected.

42
For more information on the application of zakah in Pakistan, see Parvez Ahmad Butt, “Zakah Collection: A Case
Study of Pakistan,” paper presented at the Third International Conference on Zakah.
43
Ibid., p. 17.
 Furthermore, take a look at the amount of zakah collected in Saudi Arabia, Pakistan and
Yemen as shown in tables 1-3 below:

Table 2

Year 1406-1407 1407-1408 1408-1409

Zakah 1300 870 900
GDP (incl crude oil & gas) 271091 275453 285145
GDP (w/out crude oil & gas) 209262 212163 223434
% of zakah to GDP 0.4% 0.3% 0.3%
(incl crude oil & gas)

% of zakah to GDP 0.6% 0.4% 0.4%

(w/out crude oil & gas)
_________________________
Source:- Statistical yearbook, 1989, Ministry of Finance, Kingdom of Saudi Arabia, p. 554, and Statistical summary,
1410/1411, SAMA, p. 132.

Table 2
Zakah and ushr collection and GNP in Pakistan in current prices (millions of repees):

Year 1405/06 1406/07 1407/08 1408/09

Ushr 483 423 405 395

Zakah 1439 1512 1944 2190

----- ----- ----- -----
1922 1925 2349 2585
GNP 507678 551809 630120 711143

% Zakah/GNP 0.3% 0.3% 0.3% 0.3%

_________________________
Source:- Pakistan Statistical Yearbook, 1990, pp. 389-390 and 458.
 Table 3
Year 1985 1986 1987 1988 1989

Zakah 166 215 305 333 337

GDP 46129 57892 N/A N/A N/A

Publ. Revenues 7604 11128 12740 17955 228

% zakah/GDP 0.4% 0.4% ----- ----- -----

% zakah/PR 2.2% 1.9% 2.4% 1.9% 15%
_________________________
Source:- Central Bank of Yemen, Quarterly Financial Reports, 2nd quarter, 1190, and Statistical Yearbook of
Yemen, Central Planning Organization, 1986, p. 378.

These figures indicate that the zakah collected does not exceed 0.3% to 0.4% in any of
these countries. Yet, they are the countries that have mandatory payment of zakah to the
government and a wider coverage of zakatable items than other countries44.
If these figures represent a reality about the amount of zakah in a Muslim society, its
effect must be very meager or negligible. New research is needed in this area which should
investigate any underlying assumptions and/or problems in the empirical practice of zakah and
may call for fresh studies of the fiqhi positions and the administrative and econo-political aspects
of the contemporary application of zakah in Muslim countries.
Also more empirical studies which can estimate the potential proceeds of zakah in the
Muslim countries are still in demand. These kinds of studies would be useful to determine the
volume of zakah and consequently suggest possible effects on recipients. Moreover, these
studies would encourage decision makers to take action in implementing zakah in the Muslim
countries.
Additionally, such empirical studies must encourage further and deeper analysis of the
effect of zakah on major economic and financial variables as well as its efficacy in regards to
each of its objectives of eradicating poverty, encouraging investment, restructuring output
composition, etc.
In the theoretical arena, fresh research in the areas of the use of zakah, zakatable items
and timing, and methods of collection and distribution is very much needed. These kinds of
studies may explore the Shari’ah position on each policy proposition and project the
effectiveness of suggested policy tools.
Finally, theoretical studies which provide an economic explanation of the rates of zakah
and its nisab are also needed since until today there is no satisfactory economic explanation
available of the differences between the nisab and rates of different items of wealth and income.

44
Among the other three countries, Libya, Malaysia and Sudan, that have certain forms of obligatory payment of
zakah to the government, Sudan has the wider coverage of items of wealth and income. The writer has obtained
personal information from the Zakah Chamber in Sudan to the effect that zakah collected does not exceed 0.3% of
GDP.