Zakat in Islamic Economics: A Catalyst for Economic Justice and Social Welfare

Do we really appreciate zakat enough?

Do we really appreciate zakat enough?

Zakat, one of the Five Pillars of Islam, plays a crucial role in Islamic economic principles and acts as a powerful tool for social welfare and poverty alleviation.

This article will explore the significance of Zakat in the context of Islamic economics by delving into how it is collected, distributed, as well as its profound impact on poverty alleviation and social justice. Additionally, we will discuss the examples of countries and organizations that have effectively implemented Zakat programs in order to promote economic welfare for individuals and societies as a whole.

What is Zakat?

The term ‘Zakat’ is oft-repeated in both the Qur’an and hadith. In Surah Al Muzzammil Allah mentions: “So recite what is easy from it and establish prayer and give zakah and loan Allah a goodly loan.” (The Holy Qur’an Sahih International English Translation 73:20) and in Surah Al Mujadilah: “Then when you do not and Allah has forgiven you, then [at least] establish prayer and give zakah.” (The Holy Qur’an Sahih International English Translation 58:13)

In Surah Al Fussilat, Allah talks about the seriousness of Zakat: “Those who do not give zakah, and in the Hereafter they are disbelievers.” (The Holy Qur’an Sahih International English Translation 41:7) 

While the Qur’an laid the principles, Prophet Muhammad (peace be upon him) explained the teachings. It is narrated by Abu Huraira that he said: “The best charity is that which is practiced by a wealthy person. And start giving first to your dependents.” (Sahih Bukhari, Chapter 24, 507)

Of things that do not require Zakat to be given on them, it was narrated that he said “There is no Zakat either on a horse or a slave belonging to a Muslim.” (Sahih Bukhari, Chapter 24, 542) 

The Prophet was also reported to have said about the consequences of not giving zakat: Every day two angels come down from Heaven and one of them says, ‘O Allah! Compensate every person who spends in Your Cause,’ and the other (angel) says, ‘O Allah! Destroy every miser.” (Sahih Bukhari, Chapter 24,522) 

The Significance of Zakat for Islamic Economics

Religious Obligation and Social Duty

Islamic Perspective: Muslims don’t just view Zakat as merely a charitable donation; it is a religious obligation and a social duty which is mandated by Islamic principles. Its importance lies in its ability to purify one’s wealth, promote social justice, and create a sense of community responsibility.

When one lets go of something precious to them (in this case, money), they are waging war on their desires and can get closer to Allah.

Wealth Redistribution

Equitable Distribution: Zakat functions as a method for the redistribution of wealth and in doing so addresses economic disparities within society.

By ensuring that a portion of one’s wealth is given to those in need, Zakat acts as a means of maintaining economic equilibrium.

Economic Empowerment

Supporting the Vulnerable: Zakat is designed to support specific categories of recipients, such as the poor, needy, and those in debt.

By directing the funds towards these extremely vulnerable groups, Zakat contributes to their economic empowerment and upliftment. 

Collection and Distribution of Zakat

Collection Mechanisms

Local and Institutional Collection: Zakat is generally collected at both individual and institutional levels.

Local mosques, Islamic organizations, and government bodies all play a pivotal role in collecting Zakat. Modern technologies, such as online platforms and mobile apps, have also facilitated streamlining collection processes.

Criteria for Distribution

Eight Categories of Recipients: Islamic principles outline eight categories of recipients eligible to receive Zakat, including the poor, needy, those in debt, and those working in Zakat administration. The criteria ensure that Zakat is directed towards those most in need, contributing to its targeted impact. 

Impact on Poverty Alleviation and Social Justice

Zakat directly influences poverty by providing financial assistance to those lacking basic necessities for day-to-day living. Additionally, by fostering economic empowerment and creating a culture of giving, Zakat has an indirect impact on poverty alleviation by breaking the cycle of need. 

Zakat also promotes social justice by addressing economic disparities within society. The compulsory nature of Zakat ensures that individuals of varying financial capacities contribute to the welfare of the less fortunate, building a sense of communal responsibility. 

Examples of Effective Zakat Implementation

Saudi Arabia

National Zakat Foundation: Saudi Arabia has established the National Zakat Foundation, which serves as a centralized platform for Zakat collection and distribution. The foundation implements various programs, including interest-free loans and vocational training, contributing to economic empowerment. 


Tabung Haji: Malaysia’s Tabung Haji is a financial institution that facilitates the collection and distribution of Zakat. It not only ensures the effective utilization of Zakat funds for poverty alleviation but also provides ways for investment in Sharia-compliant ventures, which in turn contributes to economic growth for the nation.


Baznas: Indonesia’s National Board of Zakat (Baznas) plays a crucial role in coordinating Zakat collection and distribution. Through targeted programs, Baznas addresses various aspects of poverty, such as healthcare, education, and economic empowerment. 


In conclusion, Zakat stands as a foundation in Islamic economics, embodying principles of wealth redistribution, economic empowerment, and social justice. Its significance extends beyond charity as it encompasses a religious duty and social responsibility.

The collection and distribution mechanisms of Zakat involve both individual and institutional efforts, capitalizing on modern technologies for efficient processes. The impact of Zakat on poverty alleviation and social justice is notable, directly addressing the needs of the vulnerable while promoting a more equitable distribution of wealth at the same time. 

Examples from countries like Saudi Arabia, Malaysia, and Indonesia illustrate effective Zakat implementation through national foundations and financial institutions. These initiatives contribute not only to poverty alleviation but also to economic empowerment and growth.

As Zakat continues to play a vital role in Islamic economies, its principles provide a holistic framework for economic welfare, social justice, and the realization of ethical financial practices.


  1. Abdul-Rahman, Y. (2006). Zakat, the Islamic Socio-Financial Instrument. A.S. Noordeen. 
  2. Ahmed, H. (2004). Role of Zakat in Poverty Alleviation. Islamic Research and Training Institute. 
  3. Al-Bukhari, I. Sahih al-Bukhari. Dar-us-Salam Publications 
  4. Kahf, M. (2000). Zakah: Unresolved Issues in the Contemporary Fiqh. Jeddah: IRTI/IDB. 
  5. Sahih International. The Holy Qur’an. Dar-us-Salam Publications. 6. Tabung Haji. (n.d.). Malaysia. https://www.tabunghaji.gov.my/en/savings/services/thijari 7. Baznas. (n.d.). Indonesia. https://baznas.go.id/

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