This blog should be read with the understanding that I am in no way an expert on zakat, or Islam more broadly. I encourage anyone who finds inaccuracy, wishes to challenge assumptions or has further knowledge to share to comment below the article or contact me. In truth, that would be a very positive outcome as I am keen to learn more.
In working in policy for CAF, an international CSO that delivers financial products and advice for donors and CSOs of all different shapes and sizes, I have been lucky enough to engage with many of the leading thinkers and doers in a wide and diverse global sector (if you can call it a sector). I use this blog to do my thinking about the questions raised from those conversations aloud. One such question has been troubling me for some time.
It is with a surprising regularity that I hear my non-Muslim peers wonder openly whether zakat – an Islamic duty to make donations – might be able to provide a solution to whatever given issue that we might be discussing. From financing the Sustainable Development Goals (SDGs) to filling the funding gaps in humanitarian aid, zakat is frequently posited (such as here and here) as a sort of financial panacea.
For the reasons discussed in this article, this makes me somewhat uncomfortable. That is not because I do not think that it wouldn’t be great to see more zakat funds being used to address global challenges. The scale of zakat, likely to be in the tens of billions of dollars a year, means that it could have a crucial role to play in the development and aid space. Also, I am more than aware that there is no shortage of Muslims who think that zakat could be coordinated for such purposes – Islamic Relief Worldwide are proactively seeking views from Islamic scholars on a policy which clarifies how and where to use zakat in this context. It is a natural and noble instinct to see a potentially very large source of socially orientated finance and seek to connect it to solving some of the world’s problems. However, it is not advisable to make calls on people and governments citing religious tenets without having significant expertise on the subject. I am aware of the irony of the last sentence in the context of this blog.
What is zakat?
Zakat, as one of the five pillars of Islam mandates that, those who can, should commit 2.5% of their income to zakat. There are eight causes to which zakat can be distributed.
- Those living without means of livelihood (Al-Fugharā’), the poor
- Those who cannot meet their basic needs (Al-Masākīn), the needy
- To zakat collectors (Al-Āmilīyn ‘Alihā)
- To persuade those sympathetic to or expected to convert to Islam (Al-Mu’allafatu Qulūbuhum), recent converts to Islam and potential allies in the cause of Islam
- To free from slavery or servitude (Fir-Riqāb), slaves of Muslims who have or intend to free from their master by means of a kitabah contract
- Those who have incurred overwhelming debts while attempting to satisfy their basic needs (Al-Ghārimīn), debtors who in pursuit of a worthy goal incurred a debt
- Those fighting for a religious cause or a cause of God (or for Jihad in the way of Allah]and for Islamic warriors who fight against the unbelievers but are not part of salaried soldiers.
- Wayfarers, stranded travellers (Ibnu Al-Sabīl), travellers who are travelling on an Islamic goal but cannot reach their destination without financial assistance
In addition, zakat-ul-fitr is given to provide food for the poor to break fast after the holy month of Ramadan. This has a prescribed cost (currently US$7) and is necessarily limited to Muslims, both in terms of who can donate and also in its scope for use. Indeed, only the first and second causes in zakat could be considered as having potential interpretations that could enable their use for humanitarian causes, for example, and though a consensus exists amongst many scholars that these are not limited to Muslim beneficiaries, there are those who question that reading of the Quran. This remains a controversial issue in some nations and the scope for humanitarian development may depend on a local reading.
Much of the debate about how we ought to ensure that the potential of zakat is utilised in a given way leaves me uncomfortable. It is not merely a cultural norm, it is a strict religious duty. I fear that any attempts to lead a utilisation of zakat by non-Muslims may be counterproductive, due to an ignorance of the finer points of differing interpretations by sects, governments and local traditions and customs.
How zakat is collected?
A central issue when discussing zakat lies in the method by which it is collected and administered. Zakat is considered a mandatory duty for all Muslims who can afford it and as such, should not be seen as subject to the same conditions as charity. However, there is a great deal of variation in how zakat is managed. For instance, in Malaysia, Pakistan, Saudi Arabia and Yemen, zakat is mandatory and is collected by the state in much the same way as taxes – though given its separation from formal fiscal policy it should not be conflated with normal taxes. Countries such as Bangladesh, Egypt, Indonesia, Iran, Jordan and Lebanon have a centralised collection system but payment is voluntary. In other countries there is no centralised collection system for zakat and as such it is often coordinated locally within the religious community.
It is of course almost impossible to find adequate data to allow an assessment of the impact of these different collection methods. Even if we had data on the average amount of zakat being paid in each country and were able to weight the data for disposable income per capita, we would not be able to rule out counterfactual effects. For instance, whilst one could hypothesize that mandatory zakat collection by the state would drive up resources for charitable work; one could also postulate that mandatory collection would undermine the development of a culture of giving by denying individuals the satisfaction of choosing to give of their own volition.
To try and gain an understanding of these issues I have used data from the World Giving Index (last year’s unfortunately, as it has taken me a while to write this up). I have compared the proportion of people stating that they had made a donation in the past month with the method of zakat collection (as well as some other variables) to see if there are associated patterns. Clearly, the resulting data should not be seen as suggesting a direct relationship. Zakat collection is coordinated in many different ways, with some nations allowing monthly payments and others opting for annual collection. In addition, the surveys from which our data is taken are conducted at different times and as such could by chance occur at the same time as an annual zakat collection which would skew our numbers upwards. However, even with these caveats in mind, the data offers some interesting insights.
As we might expect, a centralised system for collecting zakat appears to be associated with a greater incidence of charitable giving. Where the state collects zakat 33% of people reported having given money to charity in the past month whilst in countries with no centralised collection system, only 17% reported donating in the past month. With only a very weak association (certainly no statistically significant correlation) between a nation’s wealth and either the method of zakat collection or the proportion of people giving to charity every month, such a difference seems to suggest that a centralised system for collecting zakat helps to encourage greater giving generally. Interestingly though, our data suggests that making zakat payments mandatory might actually suppress the overall frequency of giving. Whether this means more or less money for charitable work we cannot say, but we can demonstrate with some confidence that how zakat is collected does affect the overall incidence of giving.
Seeing zakat in a wider context
It is worth noting for anyone interested in zakat as a tool for humanitarian or development aid that those nations that see the best rates of zakat payment have a centralised collection system in place. As such, leveraging zakat essentially means lobbying the government. Such an ask presents a blurring of demands, as it may be that a decision to use zakat for humanitarian purposes results in a weakened sense of responsibility to increase Official Development Assistance. The state has unparalleled ability to drive public behaviour and the experience of zakat collection around the world shows that this can potentially motivate public giving. However, we should be careful about suggesting that these ends necessarily justify the means, because giving the state the responsibility for distributing charitable resources risks allowing those funds to be used for political ends but justified on moral – and in this case religious – grounds.
Islamic giving already has an important role within communities and provides a great deal of resources for the needy. Calls for this resource to be put to use elsewhere should be considerate of the current beneficiaries. Having said that, should scholars and community leaders come together and agree that zakat should be used more strategically and have a more global outlook that should be welcomed. Zakat might not be the panacea that we would like it to be, but those of us with an interest in humanitarian or development finance can gain a great deal from understanding some elements of Islamic practice. Islamic finance, with its ability to fairly distribute risk and reward, its aversion to debt interest and its emphasis on value creation could offer a potentially important solution to resourcing the Sustainable Development Goals for example.