Effectiveness of Zakah
The experience of the early Muslim history proved that when zakah was rightly collected and distributed to its worthy recipients, it led to the alleviation of poverty in that society. The Caliph Umar b. al-Khattab admonished his governor in Yemen, Mu’adh b. Jabal, after the latter had sent him one third of the zakah of Yemen: “I have not sent you as a tax-collector, but to take from the rich and give to the poor.” Mu’adh answered him: “I would not send you anything had I found somebody to take it from me.” In the second year, Mu’adh sent half the zakah of Yemen and on the third year he sent all the zakah of Yemen to the Caliph in Madinah telling him that he did not find any poor person to accept Zakah. A similar story was told during the time of Umar bin Abdul Aziz. The famous transmitter of Hadith, Imam al-Bayhaqi, narrated that Umar bin Abdul Aziz had enriched people to the extent that they did not find a poor man who would accept zakah. The story was confirmed by the messenger of ‘Umar to Africa (Tunisia) who collected zakah but could not find anybody to accept it. He said, “I bought slaves from the fund of zakah and freed them after promising their allegiance to the Muslims.” This is why the collectors of zakah in the past were not only concerned with providing food to the poor but surpassed that to paying debts of a man even if he had a house, furniture, a servant and a horse, as well as setting girls married and freeing slaves.
So, is it possible even today to make the institution of zakah effective in alleviating poverty in the Muslim world as it did in the distant past? As mentioned earlier, the size of poverty in the Muslim world is one of the highest in the whole world. About 26 percent of the population in Muslim countries live under conditions of absolute poverty. The ratio of poverty today is higher than it used to be in the past, and the resentment against poverty as an outcome of economic injustice in society is more felt at present than in the past. On the other hand the collection of zakah as a mechanism of combating poverty is neglected in most Muslim countries. Out of the 52 member states in the QIC only 13 countries have arranged the collection of zakah, amongst which only six do so by the regulation of law. And there is no one single state which takes zakah from all the sources recommended by distinguished contemporary scholars like al-Qaradawi. At the same time the disbursement of zakah in some of these countries is not above criticism because it leads to the denial of some poor people their rights in zakah. Notwithstanding a few exceptions, we miss the transference of zakah from the rich states to the poor ones as it used to happen in the glorious days of Muslim history. Therefore, there is little wonder why the institution of Zakah today has not been able to solve the problem of poverty in those countries which implement it. It has to be remembered that Islam does not depend on zakah alone in eliminating poverty, as explained earlier in this paper.
At this stage we may examine the effects of zakah in three poor Muslim countries: Pakistan, Sudan and Egypt.
The Pakistan experience of zakah has been well studied. Among the important studies are the one carried out by the International Institute of Islamic Economics under the supervision of Dr. Faiz Muhammad (1992), the field-study done by the Federal Bureau of Statistics (1991) and the doctoral thesis of Naseem Shirazi (1993). From these studies we may conclude the following points:
The collection of zakah is far less than its true potential mainly because important sources are left out from legal compulsion, such as: gold, silver, current accounts, livestock, commercial goods, wages and income-generating properties or professions. The amount collected from all these items did not exceed Rs 7.7 million in 1992-93 and Rs 7.4 million in 1993-94. The zakah law exempt anybody from paying zakah if he declared that he was not a Sunni Muslim. Since zakah is deducted by the financial institutions from the investment on the first day of Ramadan every years, one can escape paying zakah if he draws his savings before that date. The zakah on crops showed sharp decline from Rs 179 million to less than a quarter of a million in 1993. Furthermore, not all that is collected by the central bank is distributed to provincial and local committees of zakah the same year.
In the area of distribution, field studies showed that poverty still exists in Pakistan on a large-scale despite the implementation of zakah system for 15 years, and that a high proportion of deserving people do not receive any zakah. A recent World Bank report predicted that incidence of poverty in Pakistan would be 22 percent in 1995-96. The figure is challenged by some senior economists like Dr. Mahbubul Haq who thought that the percentage is higher than that. The monthly subsistence allowance given to mustahiqeen is not sufficient to meet their basic needs, that the number of recipients from the rehabilitation fund is small and that the amount given is not enough to start a gainful activity. About 15 percent of zakah recipients complained about the improper disbursement of zakah and that many of the zakat committees do not understand Islamic rules.
Despite the critical observations on the collection of zakah and its distribution, the achievements of the zakah system in Pakistan are considerable. The partial success of the system indicates that it may eventually lead to the alleviation of poverty in the whole country if the shortcomings of the system are rectified. The major achievements may be summarised as follows: The increase in the zakah collection is higher than the increase of GNP and prices. In real terms, the zakah collection between 1980 to 1989 increased by about 52 percent. If we accept the results arrived at by the Federal Bureau of Statistic (HIES, 1990-91) then the payment of zakah in that year was actually five times (Rs 14.4 billion) more than what the government managed to collect. The findings of the study show that many people are ready to pay zakah as a religious duty but not through the government mechanism. This means that the official distribution of Zakah as reflected in the reports of the central zakah administration does not depict the correct picture of the role of zakah in society. The same study showed that the rural people paid 57.6 percent of the total zakah as compared to 42.4 percent paid by the urban population. The percentage of the poor who benefited from zakah in one way or other is estimated by Faiz to be between 50 to 60 percent. The HIES (1990-91) report confirmed that zakah goes to the most poor sector as one-tenth of the poorest population received 94 percent of the distributed zakah. About 1.5 million people — mostly heads of households received zakah every year. The number of widows, orphans and disabled who benefited from zakah amounted to 1.14 million. They received Rs 6.4 billion during the last 13 years. And the 60 percent of total releasable funds are allocated to individuals for their subsistence while the remaining 40 percent are utilised through institutional assistance. The households which received rehabilitation grants increased by 28 percent in 1992-93, their number reached 588,000, and the allowance increased in the same year from Rs.980 to Rs 3,000. The monthly subsistence allowance for 1.15 million families became Rs. 992 in 1992-93. The increase in the funds for medical care, education, social welfare institutions and deeni madaris reached 12.2 percent in 1992-93. About 436,000 persons benefited from the funds which amounted in that year to a quarter of a billion rupees. Whatever is mentioned about the performance of some of the zakat committees the mere fact that about a quarter of a million persons volunteered to serve in these committees without any material remuneration shows the ability of zakah to mobilise human resources. In the light of above mentioned results it is possible that if the zakah collection is carried out to its maximum potential (between 2 to 4 percent of GDP), and its distribution targeted only the poor sector of society in a fair and efficient manner the zakah system might well fulfil the objective of eliminating poverty from society.
Unlike Pakistan, the Sudanese experience of zakah did not get its share of academic studies. Therefor, our source of information are the reports and publications of Diwan al-Zakah in Sudan. The zakah law adopts the juristic opinion which widens the sources to make all forms of properties and incomes as zakat-able. With the exception of zakatul fitr, all the zakah has to be paid to the state by law. However, the law allows the giver of zakah to keep 20 percent of his zakah to donate himself to deserving people. This was done in deference to the custom of some rich people who used to assist their relatives or poor families or religious institutions long before the zakah had become compulsory. Despite the provision of wide zakatable sources, and the seriousness of the government in collecting zakah, the percentage of its revenue remains half percent of the GDP. The reasons for this situation may be that the zakah on livestock, which is a considerable wealth in Sudan, did not exceed 10 percent of its potential as estimated by Diwan al-Zakah. Unlike farmers, the bedouin breeders of cattle were not accustomed to pay zakah. Although not lacking in enthusiasm the administration of zakah is experienced and understaffed with very limited facilities. In addition, there are practical difficulties of assessing some sources of wealth like commercial commodities, the earnings of the private sector, etc. In spite of the provision of 20 percent to donors there are many who prefer to expend their zakah by themselves. Nevertheless, the statistics of zakah showed that the average increase in zakah collection during the last four years (1411-1415H) reached the high figure of 135 percent each year.
The administration of zakah in Sudan tried to generalise the distribution of zakah to all recipients mentioned in the Qur’an with the election of the unavailable one, “slaves”. The Diwan utilised this share in constructing its offices in different regions. If we take the report of the year 1413 H as an example for the method of distribution, we get the following picture:
Zakah revenue in the year 1413 H = 3.775 billion pounds
a) Share for the way of God (da’wah and jihad) an those whose hearts have been reconciled = 1.622 b.p
b) Share of the poor and needy = 1.251 b.p
c) Share of indebted and wayfarers = 0.101 b.p
d) Share of zakah employees, buildings and administrative cost = 1.110 b.p
We note that the distribution exceeded the actual revenue of the year, that the share of the poor is 30 percent while the share for the way of God (da’wah and jihad) reached 39 percent. The share of employees, buildings and administration is rather high as it reached 27 percent. It is understandable that the civil war in southern Sudan had influenced the distribution of zakah but at the same time the economic situation in the country required more consideration to the poor. The board of trustees of Diwan al-Zakah was aware of the abundance of poverty in the country, and took a decision that the share of the poor should be 45 percent of the zakah revenue. The ministry of finance, in the same year, decided to supplement the share of the poor by giving 800 S. pounds monthly to 500,000 families. However, it could not continue to qualify for working opportunities. In the year 1413 H it provided 258 million pounds to provide work facilities for 12,000 households.
The zakah system in Sudan is functioning under difficult economic and political circumstances. In spite of a marked high increase in the annual revenue the attempt to alleviate poverty through Zakah has been hampered by the general situation there. However, considering the economic situation in the country and the size of poverty which may be, like other Sub-Saharan countries, as high as 47 percent of the population, it is very difficult to suppose that Zakah alone can eliminate poverty in Sudan. Even if the zakah collection reaches the mark of 4 percent of the GDP and the total revenue is distributed to the poor it would not be enough to eliminate poverty. It means that in case of some poor Muslim countries, the elimination of poverty requires the active role of other factors which we mentioned earlier in this paper as well as transference of the surplus zakah from the rich countries to the poor ones.
The experiment of zakah in Nasir Bank is a pioneer one as it started in the early 1970s. It is characterised by voluntary collection of zakah and the initiative to form a zakat committee is usually taken by some respectable citizens who approach the bank for recognition. The bank, on its part, bears all the administrative costs and allows the committees to take the decisions concerning the disbursement of zakah in the locality from where they collected it. The revenue of the zakah between 1972 to 1991 reached 118 millionEgyptian pounds which benefited 12 million deserving people.
There are other organisations which also collect and distribute zakah, like Jam’iyah al-Shar’iyyah, Faysal Islamic Bank, Jam’iyah Masjid Mahmud and the International Islamic Bank. Nasir Bank is the most important in respect of its affiliated committees (about 5,000 in 1994) and the size of zakah revenue. The zakah income of Faysal Islamic Bank during 14 years (1400-1414 H) was around 37.2 million Egyptian pounds, the International Bank apparently confines itself to the zakah of its own clients. Those who benefited from Jam’iyah al-Shar’iyyah supported 1,31,000 orphans in 1994, assisted 476 disabled persons and enabled 474 girls to get married.
The services of Nasir Bank to the poor included education, medical care, nurseries and laundry facilities. By 1986, the bank was running four hospitals and 25 clinics in Cairo besides 15 clinics in the provinces. It managed to allow 37,000 poor drivers to own their taxi cars over a number of years as part of rehabilitation programmes. The bank links with its charitable social work da’wah activities as well. The Human Development Report of 1994 described the size of poverty in Egypt as 12.6 million persons, i.e. 23 percent of the whole population. Considering the GNP of Egypt which amounts to $33.5 billion in 1991 it is possible for it to alleviate poverty within a limited number of years if the Zakah is to be collected between 2 to 3 percent of the GNP.
Source: Poverty Alleviation in Pakistan: Present Scenario and Future Strategy, Mohibul Haq Sahibzada. Republished with permission.