The zakat system has long been an imperative cornerstone for the progress and conservation of Islamic values in a modern context. More importantly, zakat defines and reiterates the need for social welfare in any given society, as a clear and definitive approach to philanthropic behaviour in the context of religion and social progress in general.
Zakat also has long-term social implications that can be seen in theory and practice. Here are just a few of the prominent observations related to the function of zakat in society.
Basic definitions of zakat
Zakat is the third of the Islamic faith’s five essential pillars. There are three main meanings for the term zakat. The first is linguistic, the second is theological, and the third is legal.
In essence, it is a linguistic term that refers to the cleansing or purification of something from dirt or filth. It also connotes honour, progress, and expansion. In theological terms, it refers to the spiritual purification that occurs as a result of donating zakat.
Zakat is also a legal term that refers to the transfer of ownership of specified assets to a specific individual or individuals under specific circumstances.
In Islam, all resources belong to Allah, and human beings simply hold money in trust. The payment of zakat indicates that the Muslim has obeyed Allah, resulting in spiritual happiness for the individual.
Some researchers believe that zakat can assist people to overcome the undesirable trait of greed. Zakat is also a part of Islam’s social system, as its social goals suggest that Allah has granted the poor a share of the rich’s riches.
As a result, zakat serves as a vehicle for wealth distribution, bridging the gap between the rich and the poor. This increase in poor people’s purchasing power should, in theory, boost economic growth by increasing consumer spending and aggregate demand.
Zakat is a compulsory component of Islamic economics
The ban of riba and the mandate of zakat were seen as two key components of the Islamic economic and financial system by the early generation of Islamic economists. The riba prohibition has led to the formation of an Islamic banking system. Islamic banking (interest-free banking) has become the defining element of an Islamic economic system over time.
Zakat, on the other hand, has played a little part in the mainstream Islamic financial system. In summary, the Islamic commercial banking model may be more consistent with the capitalist system, making it more acceptable to mainstream financial institutions.
However, because zakat is viewed as a social welfare function, it may be less acceptable to proponents of capitalism – or at least the current and mainstream modern component of capitalism which does not prioritise welfare.
Reinforcing philanthropy in times of crisis
To overcome the immense challenge posed by the COVID-19 pandemic, the global development community must engage a wide and inclusive collection of stakeholders. While the crisis has caused enormous human misery, it has also prompted international action from institutions and individuals willing to assist.
Zakat can be a vital part of national and non-governmental emergency relief efforts. Zakat is usually disbursed within a year of the donor’s gift. This immediate benefit emphasis is ideal for crisis response.
Donors to zakat help both the impoverished and the economically insecure, which is a growing need in the world. Cash payments from zakat donors are common, and they can be quite beneficial in times of need.
Individual giving is a versatile instrument for supporting health care, food, and other pressing needs. Businesses can use corporate philanthropy to give not only money but also goods and skills.
Improving income redistribution
In practice, zakat is a religious tax imposed once a year on idle riches, livestock, agricultural products, and commercial assets whose worth exceeds a specified amount known as nisab. As a core function, the revenues of zakat are distributed to the impoverished.
As a result, it represents the significance of income distribution for economic growth in the Islamic framework as an effective instrument for income redistribution.
In traditional economics, on the other hand, supply produces its own demand, or the interest rate is the equilibrating variable for both savings and investment. This viewpoint downplays the importance of income distribution in driving economic growth.
Tackling poverty on a consistent basis
Most notably, the function of zakat aims to alleviate the various layers of poverty.
Poverty is sometimes described as a situation of scarcity, inadequacy, or income instability. Poverty can also lead to health difficulties, increase social problems, and result in isolation, prejudice, and the loss of a promising future.
Since the zakat collected will be delivered directly to the poor and needy groups, the significance of zakat (the compulsory donation of a predetermined proportion of one’s wealth to charity) as a beneficial weapon in alleviating poverty has recently been highlighted.
The proper administration of the zakat institution is viewed as a significant tool for facilitating community development and bolstering the Muslim economy.
Possible decentralisation for social welfare
Zakat contributions are required in Islamic countries like Sudan, and they provide aid to individuals in need in a variety of ways, including unconditional cash transfers, non-contributory health insurance, and seasonal assistance to families during Ramadan and in the event of an emergency.
The zakat system in Sudan particularly is based on a decentralised infrastructure that extends all the way down to the village level. Sudan’s zakat collection has risen dramatically in recent years, making it the country’s primary source of social protection funding.
Zakat’s financial sources can be deemed very sustainable due to its independence from the government budget. However, given the lack of a uniform social register and limits in monitoring systems, both coordination and openness might be improved.
Tactics for better social safety
In terms of institutionalising zakat, there is no “one-size-fits-all” solution, but decentralisation appears to be vital, as the case of Sudan indicates.
Furthermore, expanding revenue requires the implementation of an efficient collecting system, while the instruments for doing so (such as a mandatory tax or voluntary payments, for example) are context-specific.
Enhancing the function of zakat funds as social safety providers requires better cooperation among state organisations.
However, determining the feasibility of coordination (for example, database sharing necessitates resources and infrastructure) and obtaining the commitment of important stakeholders are critical steps in this process. Finally, it appears that a “de-politicization” of zakat funds is necessary to retain the public’s trust in zakat.
It’s clear that zakat represents the timeless advantages of giving alms, and its implications are far reaching into the roots of many societal ills from financial stability and psychological wellbeing to the retention of humanity in the many man-made infrastructures that run the risk of destroying the very societies that they are meant to uphold.