Answer

 Introduction

Islam is one of the ideal religions in the world as it is guided by various rules codified in the Qur’an; which regulates not only the social and cultural but also the spiritual, political, and economic aspects of life (Khasandy and Badrudin, 2019, p.66). The codified rules in the Qur’an have their focus not only on the afterlife but also on the current life and worldly wealth. One of the important rules in the Qur’an is the zakat. In specific, zakat (zakah); also known as alms-tax, is one of the five key pillars of Islam (Kasri, 2016, p.170). An essential value of Islam is that all things belong to God and, thus; human beings only hold the wealth in trust. The Qur’an says that Zakat is to be used for the poor and the needy and the for the cause of Allah. In most countries whose majority population are Muslims, zakat results in enhanced economic growth through the reduction of poverty and the increment of the parity of purchasing power.

What the Qur’an Says About Zakat

                The Qur’an is the primary basis for zakat as it requires Muslims to give charity which “shall go to the parents, the relatives, the orphans, the poor, and the traveling alien” (Al-Quran, 2:215). Additionally, Al-Quran (9:60) holds that the alms should be offered for Fuqara’ (the poor), and Al-Masakin (the needy) as well as freeing the captives and those in debt for the advancement of Allah’s cause. Moreover, Al-Quran (2:254) requires all believers of Islam to provide charities from the provisions that Allah has given them before the day when the society will be devoid of any trade, nepotism, and intercession. In Al-Quran (2:273), it has further been underscored where zakat should go. In specific, it should be directed towards the poor especially those suffering in the cause of God and cannot emigrate. The implications of such passages are that zakat after being collected should only be offered to the needy in society. Although zakat has been viewed by some Muslims as a critical aspect with regards to prayer as well as fulfilling the social obligation towards the poor in the society, the alms have been a fundamental base of the Islamic economy and serves to bridge the gap between the rich and the poor and thus strengthen the economy of a country.

Zakat’s Contribution to The Economy

The ratio of zakat collected in some of the majorly Islamic countries compared to the gross domestic product (GDP) has exceeded the poverty gap index to GDP (PGI-GDP) ratio. Such ratios imply that when the zakat resources are pooled together from the zakat collection of 17 Organization of Islamic Cooperation (OIC) countries, then such alms are sufficient to alleviate poverty in all the 17 OIC countries combined (Khasandy and Badrudin, 2019, p.67). In some of the majority Muslim countries, various regulations have been made which make it mandatory for the payment of zakat on specific items. Additionally, Nurzaman (2010, p.4) asserts that other countries such as Saudi Arabia, Egypt, Kuwait, and Libya among others have enacted laws for the government to both collect and distribute zakat. In Indonesia, for instance, according to Khasandy and Badrudin (2019, p.66), the levels of zakat have continued to increase by 119% to reach Rp1.5 billion in 2010 compared to 2006. As such, zakat contributes to not only sustainable economic growth but also better financial inclusion with the rich giving charities which are distributed to the poor. Zakat complements the efforts of the governments towards poverty elimination and thus affects the social welfare of the needy and poor which translates to better living conditions and an enhanced economy.

Zakat leads to the attainment of socio-economic justice especially when the zakat funds are deployed in various development projects such as the health services and educational services.  Historically, zakat has been seen as one of the mechanisms in Muslim majority countries of wealth distribution. According to Sarea (2012, p.16), in states where zakat has been well utilized, positive economic indicators have been found. Notably, it has resulted in poverty elevation because the alms have been dispersed to the poor, needy, debtors and slaves- people who rank lowest in the social ladder (Nurzaman, 2010, p.12). Moreover, zakat reduces unemployment as the various development projects which are started using the zakat provide employment opportunities to the people. Also, zakat contributions have resulted in the reduction of inflation rates. When zakat is paid to the right recipients, then the phenomenon of inflation is addressed as the monetary instruments are used to alleviate it by affecting the methods of both supply and demand for money (Sarea, 2012, p.18). Such positive economic impacts have been seen in countries where zakat has been considered as one of the monetary policies through the imposition of zakat payment to the recipients in accordance with the Qur’an (Kasri, 2016, p.171. Based on the examination of the indicators of economic growth such as the inequality gap between the rich and the poor, rates of unemployment, and inflation, then zakat is a vital element of economic growth.

Conclusion

Zakat; which refers mandatory alms collected from able Muslims and distributed to the needy and the poor, has resulted to the alleviation of poverty in Muslim majority countries, increased employment, and a reduction in the rates of inflation and hence economic growth. The Qur’an, which is the basis for zakat, holds that everything belongs to Allah including the worldly wealth. In countries where Muslims are the majority of populations, laws and regulations have been passed which guide the collection and distribution of zakat. In Indonesia, zakat contributions have continued to rise each year and have been effectively deployed in poverty reduction and the bridging of the gap between the rich and the poor. As a result, zakat is not only a spiritual requirement in the Quran but also an instrument to help the needy and ensure the economic growth of Muslim majority countries.

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