The economic power of 'zakat' to fight poverty

The economic power of 'zakat' to fight poverty

Muhammad Akhyar Adnan, Director, International Program,
Faculty of Economics, Universitas Islam Indonesia, Yogyakarta

Muslims have often been associated with poverty, which is
certainly the case in Indonesia. However, if the Islamic concept
of zakat (Muslims tithes) is really applied this may not be the
case.

Zakat is one of the five pillars in Islam -- besides the
syahadat (the profession of faith in Allah and His Prophet,
Muhammad), performing prayers, fasting (during Ramadhan) and the
pilgrimage to the holy city, Mecca.

The concept of zakat relates to the two dimensions of life --
the transcendental and the horizontal, that is relations between
people. Islam requires Muslims to give away at least 2.5 percent
of their wealth -- whether it be in the form of food,
agricultural or livestock products, property, gold and silver and
so forth. Its distribution is organized to target specific groups
such as orphans, as mentioned in the Koran.

The poor understanding of zakat among Muslims themselves is
considered to be one of the reasons why collections remain small
here compared to the huge number of the poor.

Misconceptions range from the understanding of the concept to
its distribution. Some confuse zakat with charity, or sadaqah
(alms).

Zakat, unlike charity, is mandatory. Those who can afford to
must give away at least 2.5 percent of their wealth -- as this
amount belongs to someone else who is less fortunate.

However many simply assume they are not rich enough -- but
they would also refuse to be classified as poor and therefore
entitled to zakat and charity. One reason for the
misunderstanding may be because the term is sometimes used
interchangeably with other terms in the Koran.

Another misperception among Muslims is that zakat is an
expense, and they try to pay as little as possible, as with
government tax. Obviously this is an incorrect view, simply
because the rationale behind tax is totally different from zakat.

Rather than an expense, the benefits of zakat should be viewed
as a kind of investment for oneself in this world and in the
hereafter.

Furthermore, many classical fiqh (Islamic jurisprudence) books
discuss zakat in terms of specific societal conditions that no
longer exist. Few books, if any, discuss zakat in the context of
contemporary economic development, where there are many
professionals -- not only farmers. Since there is no appropriate
guide for these professionals about zakat obligations, many of
them do not fulfill it.

On the other hand, many farmers, particularly in this country,
are poor, and cannot be classified as those who are obliged to
pay zakat.

The following illustration describes an ideal situation where
all Muslims who have enough wealth to pay their dues. Assume that
in a tiny province like Yogyakarta, there are approximately three
million people.

Eighty percent, or 2,400,000 of them are Muslims. Assume that
only 500,000 of them are obliged to pay zakat. They might be
categorized into three more levels: First, 200,000 people with an
income of Rp 4 million a month; second 200,000 who earn Rp 2
million a month; and third, 100,000 who earn only Rp 1 million a
month. The zakat collected, if everyone paid at least 2.5
percent, would be Rp 32.5 billion a month, or US$3.18 million per
year.

The collected funds could be used for establishing productive
business units to help the poor and needy in the form of
employment opportunities.

In the above example, 8,000 small or medium scale businesses
could be set up in one year, assuming that one needed a capital
of Rp 50 million. If every single company employed five persons,
zakat then would be able to provide about 40,000 new job
opportunities a year.

The new law, Zakat Act No. 38/1999, which rules that zakat
will be fully tax deductible starting next year, acknowledges
Muslims' contribution to the nation's development. With this
golden opportunity the zakat institutions and Muslims in general
should participate in proving the economic power of zakat to
solve the fundamental problem of the Muslim community -- poverty.

However, the issue of the law's implementation must first be
solved; particularly in regard to the professionalism of the
zakat institutions. The huge potential economic power shown above
will otherwise be meaningless, unless all parties involved try
hard to minimize the handicaps that exist today.