In the Qur’an, Allah Almighty has mentioned 8 categories of people who can receive Zakat. Allah Almighty says (which means):
“Zakat expenditures are only for the poor and for the needy and for those employed to collect [zakat] 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.” [Al-Quran, surah At-Tawbah, verse 60]
The expression “for the cause of Allah” or fi Sabil Allah was generally interpreted “Jihad fi Sabil Allah” and so many jurists restricted this Zakat expense for this purpose.
Muslim jurists also say that in the Qur’an Allah used the word “Lil fuqara’ wa Al-masakin or ‘for the poor and the needy’ and the ‘lam’ or (for)” here means ‘tamlik’ or possession. Thus they interpret the above verse to mean that the poor and needy should be made owners of this money or Tamlik Al-Zakat.
Since in public and social welfare projects, no one becomes the owner, so, according to their interpretation, the Zakat should not be used for this purpose. Thus you will find in the books of Fiqh statements emphasizing that the money should not be used to build the Masajid (mosque), schools, hospitals, hostels, etc. because this money belongs to poor and it should be given to them. There are some jurists who still hold this strict opinion concerning Zakat.
However, there are a number of jurists of this century, such as Sheikh Muhammad ‘Abduh, Rashid Rida, Maulana Mawdudi, Amin Ahsan Islahi, Yusuf Al-Qaradawi, and some Fatwa organizations in Kuwait and Egypt, they are of the opinion that the phrase ‘in the cause of Allah’ covers a broad category. It is a general term and it should be applied in all those situations where there is a need to serve Islam and Muslims.
Those scholars consider it permissible to use the Zakat money to finance the Da’wah and public welfare programs. They say that the expression ‘for the poor and needy’ can also mean ‘for the benefit of the poor and needy’.
The modern jurists also argue that in the past Muslim governments used to build Mosques, schools and used to finance public welfare projects. Now many governments are negligent in this matter. Many Muslims are living in areas where there are no Muslim governments.
Furthermore, the financial needs of the people have become so enormous and diverse that earlier rules and restrictions cannot be fully applied and may not be very useful in every place.
In his famous book Fiqh Az-Zakat, Sheikh Yusuf Al-Qaradawi, has thoroughly discussed this subject. His Fatwa is that in non-Muslim countries it is permissible to use Zakat funds to build the Masajid, Schools, and hospitals.
Muslims from all over the world go to Saudi Arabia, Kuwait, United Arab Emirates, etc. to solicit funds for the building of their Mosques and schools. Most of the business people in those countries give their Zakat for this purpose. Many people from all over the world use this money for building projects without any question.
Now, there are many people who come to North America to solicit funds for their Mosques and schools in some poor countries. American Muslims are also giving their Zakat to build Masajid and schools in other countries.
It is the concept of ‘fi Sabil Allah’ and helping the Islamic cause in many lands where it has made it possible to establish Islamic institutions and Mosques.
Zakat is basically for the poor and needy and most of it should be used to take care of their needs. I believe that for the Mosque constructions Muslims should make extra charity and should give from funds other than Zakat. However, it is not forbidden for Muslims to give their Zakat money for the building of Mosques and schools, especially in non-Muslim countries.
Islamic centers should have a separate Zakat fund. Those who do not want their Zakat to be used in building projects should give their money to the Zakat fund. But those who want to give their Zakat for the Masjid construction they should donate directly to that project.”
Allah Almighty knows best.
This Q&A was taken with slight changes from https://www.islamicity.org