Zakaat or alms giving is the third pillar of Islam. It is a compulsory giving of part of your wealth for the benefit of the ones who are needy. It is collected by the zakat organizations which then re distribute it for the socio economic development of the society. The system of zakaat ensures economic justice and distributional equity. With such a strong fiscal system, one may ask, why is our country still facing the economic problems? Why are there people below the poverty line and people who are denied the basic necessities of life?
The answer to this is the problem behind most of our economic and social infrastructure. Corruption. The morals of our society are so corrupt that we try to find a way around paying less or no zakaat at all by listing ourselves as ‘shia’ in our banks. We constantly try to find a loophole through which we can save our wealth. This is applicable not only to our beloved politicians who love to hoard their wealth outside of the state but also to the elite class residing in the country with their assets all here. The middle class who are sahib e nisaab are also no exemption from this act. It seems like there’s one thing we all have a unanimous opinion on.
In their ignorance, what they don’t know is that they are doing their own loss. Islam has given us a strong and admirable fiscal system. Not only does it reduce the gap between the rich and the poor, it also has multi dimensional positive effects.
Firstly, Zakaat funds are primarily meant for fulfillment of the basic needs, i.e. catering for the immediate consumption requirement of the poor and destitute on priority basis. However, it is desirable to provide sufficient assistance to the unemployed and least privileged individuals out of Zakaat revenues to rehabilitate them on permanent grounds if surplus funds are available. The rehabilitation of the poor of the society then leads to them seeking employment and providing boom in the industry and economy. The dependency ratio of the country decreases increasing the overall revenue and living standard of the society.
Secondly, it provides stabilization mechanism to the economy. It is to be noted that as the payment of zakaat is necessary when it is due, its distribution does not necessarily have to be in that same period. Part of the zakaat money can be kept in the treasury and only distributed when needed. Thus in time of boom and economic prosperity, the revenue from zakaat will swell up and be held as budget surplus and the adverse effects of business cycles will be minimized on account of the cushioning effect of Zakaat
Thirdly, when the zakaat is being taken and redistributed in both the times of prosperity and the the times of economic turmoil, the money in the pocket of the common man remain same in either of the times. Thus in times of boom the consumption and investment expenditure are maintained to a low level dampening the inflation rate. On the other hand, the distribution of the Zakaat will encourage consumption and aggregate demand due to multiplier effect in the periods of depression, leading to more investment and employment generation.
And last but not the least it leads to economic development and growth by eroding idle saving and encouraging a wider circulation of wealth. It forces the greedy hoarders to liquidify most of their assets as they will have to pay zakaat on that property otherwise. This monetary fluency encourages a positive effect on the economy not only by reducing the rich and poor gap but providing a favorable environment for business and employment.
We have been bestowed with a very effective economic system and it is a shame that we don’t apply and follow it. If half of our elites and politicians started paying their proper and due zakaat , I am positive that this country will see a boom in its GDP.