Zakat is one of the five pillars of Islam that teaches Muslims how to manage wealth. It also focuses on addressing economic inequality and fosters generosity in the Muslim community.
Eligible recipients include the poor, zakat officers, those burdened with debt, travelers, and those in the path of Allah (jihad or da’wah). Zakat also helps free enslaved people.
Purification of the Heart
In its spiritual significance, zakat purifies the heart of its giver from excessive attachment to money and possessions. Paying Zakat is an obligation for every financially stable Muslim, aimed at redistributing wealth and assisting the less fortunate. It not only purifies wealth but also serves as a reminder of the importance of empathy and gratitude. By contributing 2.5% of one’s assets annually, believers uphold a pillar of their faith and contribute meaningfully to social welfare. It awakens the sense of brotherhood with less fortunate members of society and stirs the moral conscience to make sacrifice for them. From an economic perspective, zakat discourages hoarding and concentration of wealth and facilitates its steady flow from rich to poor. 
Zakat’s express purpose is to effectively compel the Muslim community’s wealthy to elevate its poor out of poverty and into dignified economic self-reliance. It speaks to the utmost importance Islam places on freeing human beings from subjugation to others and on fostering a society of compassion, mutual support, and social justice.
The Quran explicitly substantiates zakat as an obligation of every Muslim that meets its criteria, and the Prophet, may Allah be pleased with him, has elaborated on it extensively in his Sunnah. Muslims from the earliest days have agreed on the consensus (ijma’) that anyone who categorically rejects or ignores zakat, even after having knowledge of it as a Pillar of Islam and receiving clear explanation about it making it plain that it is an obligation decreed by God, has disbelieved in Islam and renounced it as his or her religion.
Muslims must pay zakat once per year on their eligible wealth after it reaches the minimum threshold amount known as nisab, or equivalent to 85 grams of gold or 595 grams of silver. This includes cash, personal belongings, real estate, and business assets. The only exclusions are immediate debts, which must be paid off before calculating zakat, and long-term loans that will be paid off within the year.
Then, it is distributed to specific recipients according to the guidelines articulated in the Quran and the Sunnah. These include the needy, such as those who cannot afford to purchase or maintain a basic standard of living without assistance; the hungry, including those who are not in a position to feed themselves or their families; and those working to collect and distribute zakat, who are compensated from the zakat fund for their work.
Economic Equity
The concept of Zakat has not only religious and spiritual significance, but it also has important economic implications. It helps to re-circulate wealth amongst the poor and needy, promotes solidarity and the spirit of giving, and develops and spreads a culture of caring in society. It awakens a sense of brotherhood with the less fortunate members of society, and stirs up a moral obligation to sacrifice for them.
As the world’s largest voluntary wealth transfer mechanism, it is one of the most effective tools for tackling poverty and providing purchasing power to the poor. It is not a tax, but a form of worship that enables Muslims to come closer to their Lord through offering some of their wealth to the needy. From an economic standpoint, zakat is a tool for development, as it encourages people to produce goods, thus enhancing production and stimulating the economy of a country. Zakat is also a tool for eradicating poverty, since it discourages hoarding and concentration of wealth and allows it to be distributed in accordance with the law.
In a global context, Zakat is an important instrument for helping the poorest of the poor in all societies and bringing them into a better social position. It can be applied to all types of assets, including money, gold, silver and livestock. However, it is important to note that a person’s Zakat is only due when his or her assets reach a certain threshold. In general, the most appropriate assets for calculating Zakat are cash, bank accounts, stocks and bonds. Moreover, personal loans and debts are not included in the calculation of Zakat. Nor should a person include their own home or any item required for his or her survival in the calculation of Zakat.
According to Islamic doctrine, the collected amount of Zakat should be given to the following categories of people: poor and needy (muzzakhir), zakat collectors, orphans, widows, individuals who are slated for release from slavery or captivity, those who are weighed down with excessive debt, those who fight in the way of Allah (mujahidin) and stranded travellers. The distribution of Zakat is supervised by the Muslim community, which is responsible for identifying the recipients and distributing the funds.
Social Cohesiveness
Zakat is a transformative economic tool that redistributes wealth and reduces economic disparities. Its impact goes beyond the individual level, as it contributes to the cohesion of society by fostering cooperation between different segments of the community. It also helps to alleviate poverty and provide a safety net for the most vulnerable members of society, which in turn enhances the standard of living for all.
Moreover, zakat also encourages spiritual growth. By redirecting a portion of one’s wealth to the welfare of others, it purifies the remaining wealth by introducing barakah or divine blessings into it. This instills the spirit of generosity, empathy, and humility within the giver. Furthermore, it also serves as a reminder of the transient nature of material wealth and the need for one to be grateful for his or her blessings. It also instills the sense of responsibility towards the less fortunate, as it is a fundamental part of Islamic faith.
Furthermore, the obligation of zakat teaches Muslims that they must be accountable for their actions and words. For example, the Quran requires that if a Muslim steals something from another person, the offender must pay it back. Similarly, it is a crime to insult a believer in any form. The Islamic judicial system enforces these obligations through the Quran and Hadith, which have been translated into law by scholars over the centuries.
Zakat plays a crucial role in the development of Muslim societies by promoting social cohesion and providing economic benefits. It is an essential element of the Islamic economic model, which emphasizes wealth redistribution and the fair distribution of resources. Historically, the implementation of zakat has been a dynamic process that has evolved over time in response to socio-economic developments, while keeping true to its theological foundations.
Zakat has been a catalyst for change in Muslim societies by empowering people through education, employment opportunities, and community development initiatives. It also bolsters economic growth by promoting investment and facilitating the flow of private capital to poorer communities. As a result, it has contributed to poverty reduction and improved the quality of life for many people in developing countries.
Gratitude and Generosity
Zakat focuses the mind on giving rather than possessing wealth and encourages individuals to be thankful for the blessings in their lives. It also fosters a sense of compassion and empathy for those in need. It is a great way to break the cycle of poverty and build sustainable communities by providing necessary tools for success, like financial support, education, and vocational training.
It promotes economic equity by ensuring that wealth is redistributed, preventing the concentration of wealth in the hands of a few. This helps prevent social unrest and provides a stable economy. Additionally, it supports entrepreneurship and boosts the overall economy by encouraging investment. By helping the poor acquire assets and skills, they can start their own businesses and contribute to the economy.
As a religious duty, Zakat encourages Muslims to focus on spiritual values and strengthen community bonds. It awakens the conscience of believers to the needs of their less fortunate brothers and sisters, instilling a sense of generosity and responsibility.
The Quran regularly mentions the importance of Zakat, describing its various benefits, including spiritual purification and economic justice. It reminds Muslims that their wealth belongs to God and should be used for His good.
The definition of zakat varies, but it is generally based on the value of an individual’s accumulated savings and wealth. The amount is calculated based on the lunar year and is paid to individuals who are eligible to receive it, such as poor people, orphans, widows, those in debt, freed slaves, those engaged in Islamic education, da’wah (Islamic missionary work), or jihad (striving in the path of God through non-violent means). It can also be given to stranded travelers.
Zakat can be applied to both commercial and personal assets, as long as the owner has been a Muslim for a certain period of time and is wealthy enough to pay it. Some assets, such as food and clothing, are exempt from zakat. Other assets, such as gold and silver, are considered zakatable once they reach the minimum level required, known as nisab. Immediate debts are deducted from the nisab, while long-term loans do not.
