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Home arrow Business & Finance arrow The art of RF (riba-free) Islamic banking and finance
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Developing the Institution of Giving (Zakah) as a Required Islamic Ritual (Like Prayers)

To change the act of giving from being voluntary to being compulsory, and to underline the value of giving to the poor and needy and helping them, alms (called zakah in Islam) were included as one of the required five pillars of Islam. In other words, giving alms has the same weight as the pronouncement and witness of the faith, the prayers, the fasting during the month of Ramadan, and the Hajj (pilgrimage). It was also given a descriptive name, zakah, which implies that paying out zakah (alms) in fact purifies and cleanses the rest of the assets.

The zakah is the annual obligatory ritual of purifying one's assets and income. The purposes of paying the zakah are to:

1. Foster mutual caring and support between members of the community — both the rich and the poor.

2. Purify the self, the soul, and the assets of each household.

3. Elevate the spiritual soul of purity and excellence.

The Qur'aan contains many verses on a number of topics that relate to giving in the way of God. These are:

■ Those who pay out the zakah will be paid back by God and should not fear and consider zakah payment as a loss:

2:277 Those believers who heed almighty God and do good deeds and pay their obligated zakah (alms) will be paid for their work by God, and there is no fear about their affairs and destiny, and they will not grieve or be sad.

■ If you pay the zakah by helping to give the poor and needy without charging riba will multiply their returns on that investment with God:

30:39 whatever you earned from riba sources to grow in peoples' assets will never grow in the sight of God, and whatever you pay in zakah, seeking the acceptance of God, indeed these are the ones who will multiply their returns and rewards.

Zakah represents the backbone of the Islamic economic system and the Law (the Judeo-Christian-Islamic Shari'aa Law). Abu-Bakr, the first Caliph who assumed the responsibility of running the emerging Muslim State after Prophet Muhammad (pp), waged a campaign to capture those who refused to pay zakah after the death of Prophet Muhammad (pp) and put them on trial.

Prophet Muhammad (pp) also taught that one's assets never reduced because of paying zakah. Prophet Muhammad (pp) pronounced (in the Hadeeth) that whenever the right of God in one's assets (that is, zakah) is not paid and stays mixed with one's assets, it eventually destroys all assets. The zakah system and methods of collecting it are designed to gather and preserve assets in the House of Treasury of the community (Bayt Ul Maal) and to reinvest such assets in the community. The amount of zakah required to be paid depends on the way the assets of each household are saved and/ or invested. The zakah system encourages community members to reinvest (riba-free or RF) their assets and savings in the community (hence paying less zakah) and not to accumulate their savings as liquid assets (cash) (which requires higher zakah).

The rich who are expected to pay zakah may hesitate to pay it, because they may think that it will reduce their wealth. The Qur'aan teaches that the fulfillment of the zakah obligation (as one of the five pillars of Islam) is one of the best investments one can make, because its return is 700 times, and more, the original investment:

2:261 the parable of those who spend their substance in the way of God is that of a grain of corn: it grows seven ears, and each ear Hath a hundred grains. God gives manifold increase to whom He [God] pleases: And God cares for all and He knows all things.

That is, a $1,000 investment with God (in the form of zakah payment) by paying it to the poor and needy, as described above, is promised to yield 700 times the investment, or $700,000 in this life and more in the hereafter.

This money is used to primarily fulfill the needs of the poor and the needy. The Qur'aan reveals:

2:273 [Charity is] for those in need, who, in God's cause are restricted [from travel], and cannot move about in the land, seeking [For trade or work]: the ignorant man thinks, because of their modesty, that they are free from want. You shall know them by their [Unfailing] mark: They beg not importunately from the entire sundry. And whatever of good ye give, be assured God knows it well.

To further institutionalize zakah (i.e., the ritual of giving), the Qur'aan has defined eight categories that should benefit from the collected zakah. The Qur'aan defines these categories, as revealed in Chapter 9 of the Qur'aan (Surah Taubah, which means Repentance), verse 60.[1]

1. The poor:

They are defined as those who cannot afford to feed or clothe themselves and their families. The purpose of paying the zakah is twofold. First is the short-term goal of feeding and clothing the poor. The other purpose, which is a long-term goal, is to teach the poor professions that can help them become gainfully employed. An example is to teach a poor person how to drive a taxi so that he or she can obtain a drivers' license and qualify as a taxi driver. Working as a driver will allow him or her to earn a halal income, and move him/her from being poor and stationed at the bottom of the social ladder to a higher step up the social ladder and qualify him or her to join those are classified as the needy (miskeen in the language of the Qur'aan).

2. The needy:

They are defined as those who have a job and receive income, but that income is not sufficient to meet all their needs and the needs of their family and dependents. An example is a low-income taxi driver, who does not own the taxi but leases it from another owner because he/ she, the needy, cannot get credit. In the system of zakah distribution ordained in the Qur'aan, the needy would be given RF credit that would help him/her to own a taxi, drive it, and eventually grow to own other taxis that would hire the poor (see category 1) to operate that fleet of taxis. This improvement in employment would eventually raise his/her status from being needy to the next step up the social ladder: becoming a small business owner and entrepreneur.

3. The zakah-collection administrators:

They are those who collect and administer the process of zakah collection, distribution, accounting, and investment.

4. Those who need to be helped, to integrate them and to bring them and their hearts closer to the community:

A portion of the zakah funds is paid to this category to build bridges between these people and the community, in an effort to create a dignified, united, prosperous, and peaceful community regardless of faith, color, national origin, political orientation, gender, and/or language.

5. Freeing the slaves:

This category of spending is used to pay for the freeing and liberation of the slaves. This category also applies to many communities that are forced to live under the rule of dictators and who are longing for freedom and liberty.

6. Relieving the heavily indebted:

These members of the community are defined as those who accumulated a lot of debt due to unfortunate circumstances that are out of their hands.

7. Spending in the way of God:

A portion of the collected zakah can be donated to support any charitable effort to please God. Examples include building a school or a place of worship, or helping a student, a refugee, or a new immigrant.

8. Helping travelers/wayfarers:

These are newcomers and travelers who move to new locations or travel to establish a new life, to search for new opportunities, to develop new contacts, relationships, and businesses, and/or to open new markets, but do not have the resources to do it. This money can be used to build hostels, community hotels, and facilities that would make it easier for people to travel and achieve their goals.

It is interesting to note that each of the zakah spending categories/outlet represents 12.5 percent (one-eighth) of the total zakah collected. If an outlet has been satisfied and does not need money, then the money is redistributed as needed to the other remaining categories. The Judeo-Christian-lslamic Shari'aa law allows the head of the state to levy an additional alms payment by those who are capable in case the collected zakah in the treasury cannot meet its obligation.

Other sources of voluntary contributions to the poor and the needy come from voluntary donations to excel over and above the obligatory zakah. This voluntary giving, called sadaqah, can be paid through the system of zakah to the treasury of the community or can be managed and paid directly by the givers to the needy.

Yet another source of funds for giving to the poor and the needy is Nazr, a promissory donation that is the result of a personal promise between the believer involved and God. It is due and payable once the believer realizes his/her particular goal, dream, and/or wish. Nazr is paid directly by the giver to the specific entity identified while making the promise.

 
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