Zakat and Poverty Alleviation: Institutionalizing Zakat

Zakat is an Islamic practice based on one of the five pillars of the religion. This obligation for Muslims to give alms to the less fortunate is aimed at alleviating poverty in society. Yet in many countries, poverty is a grim and persistent reality despite zakat institutions. What can we learn from success stories in zakat management?

Encouraging sustainability

Poverty occurs due to the lack of transfer of assets to the poor. The zakat model ensures the net transfer of wealth to the poorest people at the bottom of the pyramid, without burdening them with repayment and interest.

Zakat has to ensure sustainability for the recipients over the long term. A zakat project jointly initiated by several corporations in some countries has demonstrated success in helping poor families increase their income.

A post-assessment of the project found that not only was the original zakat capital intact, but it had increased by nearly 15 percent. The study also recommended a phase-out exit strategy of another two years, which will enable the families to be self-sustainable instead of relapsing into poverty. While zakat can be a short-term arrangement, for long-term rehabilitation and poverty alleviation, waqf institutions are needed to open up opportunities for the poor to access funds in the future.

Treating zakat payers as shareholders

To successfully institutionalize zakat, the role of Muslim scholarship must be respected. Scholars need to work with practitioners to develop a framework for zakat distribution and come up with authentic and relevant solutions.

Zakat payers should be served as customers and treated as shareholders. As customers, zakat payers want education and a deeper understanding of zakat, including support for calculating zakat. As shareholders, they want an easy and accessible collection, the integrity of management, transparency of information and clear communication.

Zakat payers should not be taken for granted, even though zakat is an obligation, as this attitude will cause a lot of disenchantment among the payers.

Transforming lives of zakat recipients

To better serve zakat recipients, data gathering and management are critical for correct distribution, to measure the impact, and to set a future agenda for advocacy and policy.

Zakat should not only aim to alleviate poverty among its recipients but should also transform their lives. Gaining a deeper understanding of the community that needs help will enable the zakat funds to be used more effectively and strategically. This approach also enables zakat organizations and institutions to determine whether those asking for aid are truly eligible and are not violating social security laws.

While the traditional understanding of zakat is that Muslims give obligatory alms with the intention of sharing their wealth with the poor, zakat should go beyond mere charity- giving. Hence, zakat should be used for education, training, jobs creation and empowerment of people. Furthermore, as zakat is not always appropriate in all situations, the boundaries have to be very clearly defined.

Institutionalizing zakat

Institutionalization of zakat needs to be carefully managed to achieve:
• The scale of distribution; and
• Quality, in terms of appropriate distribution and communication to zakat payers.

Establishing a proper collection and distribution method of zakat is of spiritual and economic concern. To achieve this, more dialogue is needed across the state and community zakat institutions to share knowledge, information and best practices. Islamic financial institutions have a significant role to play here.

One challenge of institutionalizing zakat stems from the concern that employees of a zakat organization could be biased or corrupt. This is why such institutes had to be stringently audited as they are no different from any other institution, such as a government or a bank. There are good and bad, and what is needed is carefully managed and nurtured institutionalization that gives scale to zakat distribution, while making sure there is quality in terms of how it is distributed and how zakat payers are communicated to.


This is based on a session in the 10th WIEF in Dubai.

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