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CharityFaith

The Benefits of Zakat: Alleviating Poverty and Promoting Inclusive Growth

“And establish prayer and give Zakat, and whatever good you put forward for yourselves – you will find it with Allah.” (Qur’an 2:110)

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“And establish prayer and give Zakat, and whatever good you put forward for yourselves – you will find it with Allah.” (Qur’an 2:110)

Islam has a framework for poverty alleviation called Zakat.

Every year Muslims pay Zakat from their wealth to the poor. Zakat uplifts the underprivileged sections of society, giving them a better chance at realizing their potential, and contributing to the economy with added strength.

Zakat has far-reaching consequences in improving not only the economic conditions of people but also fostering humanity and increasing harmony in society.

“And establish prayer and give Zakat, and whatever good you put forward for yourselves – you will find it with Allah.” Qur’an 2:110

Zakat is one of the five pillars of Islam declared by the Prophet Muhammed. It is a mandatory charitable activity conceived to redistribute wealth among Muslims, foster social cohesion, and establish financial stability within the community.

Although Zakat addresses socio-economic disparities and promotes the well-being of society’s most vulnerable members, Zakat also plays a crucial role in driving inclusive growth and sustainable development. This article delves into the socio-economic benefits of Zakat, discussing how this Islamic practice contributes to poverty alleviation, economic growth, financial inclusion, and social harmony.

Poverty Alleviation

One of the many objectives of Zakat is alleviating poverty and improving living conditions for the less fortunate. Zakat combats poverty and promotes social justice by directing funds to needy people.

Research conducted in various Muslim-majority countries demonstrates the significant impact of Zakat on poverty reduction, for example:

  • There is no exact estimate on how much Zakat is collected in India, however with estimates fluctuating between USD 90 Billion and 5 Trillion annually, it is clear how impactful it really is. (Indian Express, 2019) [1]
  • In Pakistan, Zakat disbursement resulted in a 7.5% reduction in the poverty headcount and a 14.2% reduction in the poverty gap (Qayyum, 2018)[2].
  • In Indonesia, the implementation of productive Zakat programs led to a 5.5% reduction in the poverty rate in rural areas (Sulaiman et al., 2019)[3].

These findings highlight the transformative potential of Zakat in enhancing the quality of life for millions of people worldwide.

Economic Growth and Financial Inclusion

Zakat contributes to economic growth by increasing the disposable income of lower-income households, thereby stimulating consumption and demand.

A study in Saudi Arabia found that Zakat has a positive impact on GDP growth, with a 1% increase in Zakat leading to a 0.26% increase in GDP (Al-Jarhi & Iqbal, 2018)[4].

Furthermore, by channeling wealth from the more affluent members of society to the less privileged, Zakat promotes financial inclusion and economic empowerment, ensuring that a more significant proportion of the population has access to resources and opportunities for economic participation.

Education and Healthcare

Zakat funds are often allocated to support education and healthcare initiatives, contributing to human capital development and improving social welfare. Access to quality education and healthcare are essential components of a thriving society.

Zakat can help bridge the gap in resource distribution, enabling disadvantaged individuals to access these essential services. Human capital development is the most determining factor for nations’ success or failure. By investing in human capital, Zakat fosters long-term socio-economic development and paves the way for a more equitable society.

Social Cohesion and Solidarity

The practice of Zakat strengthens social cohesion and solidarity within Muslim communities. By alleviating socio-economic disparities, Zakat fosters a sense of empathy and interconnectedness among Muslims, encouraging them to care for and support one another.

This collective sense of responsibility enhances social harmony, contributing to well-being. Moreover, Zakat can also reduce tensions between different socio-economic groups by promoting a more equitable distribution of resources.

Bridging the Rich-Poor Gap

The growing rich-poor gap is a pressing global issue characterized by widening income disparities and unequal access to resources and opportunities between the affluent and the less privileged. While this disparity has utility, the gap cannot increase beyond meaningful bounds.

This widening divide perpetuates social and economic inequality and undermines social cohesion, increasing crime rates, causing social unrest, and reducing economic growth. Zakat can address the rich-poor gap by promoting inclusive growth, equitable distribution of resources, and enabling equal access to essential services such as education, healthcare, and employment.

By fostering an environment where all members of society can participate in and benefit from economic growth, we can work towards narrowing the rich-poor gap and building a more just and equitable world.

Conclusion

As a cornerstone of Islamic philanthropy, Zakat has far-reaching socio-economic benefits, from poverty alleviation to fostering inclusive growth and social cohesion. Real-world examples from countries such as India, Pakistan, Indonesia, and Saudi Arabia demonstrate the impact of Zakat on improving living conditions, promoting financial stability, and nurturing social harmony.

Moreover, as an integral part of the Islamic faith, Zakat serves as a powerful reminder of the collective responsibility Muslims share in ensuring the welfare and prosperity of their communities, contributing to a more equitable and just society.

By addressing the root causes of socio-economic disparities, Zakat alleviates immediate financial hardships and contributes to long-term systemic change. Furthermore, by empowering individuals through education and healthcare, creating opportunities for economic participation, and fostering a supportive community, Zakat helps to build a foundation for sustainable development and lasting social change.

Zakat serves as a reminder that individuals are responsible for building a just and prosperous society. Therefore, collective efforts to leverage this tenant of Islam for the greater good of society impact both the individual and society.


References

  1. Indian Express. (2019). Zakat can transform Muslim community: Survey
  2. Qayyum, A. (2018). The Impact of Zakat on Poverty and Income Inequality in Pakistan. International Journal of Zakat and Islamic Philanthropy, 1(1), 61-71.
  3. Sulaiman, M., Sabirzyanov, R., Naseem, N. A., & Chaudhry, F. (2019). The impact of productive zakat distribution on rural economic growth and income inequality in Indonesia. International Journal of Zakat and Islamic Philanthropy, 1(2), 107-116.
  4. Al-Jarhi, M., & Iqbal, Z. (2018). Economic growth and income inequality effects of Zakat in Saudi Arabia. International Journal of Zakat, 3(1), 1-16.

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