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A New Paradigm on the Management of Zakah

Blog Action Day 2008

It’s the day of the year again, October 15, the Blog Action Day. The topic for this year’s event is Poverty. So, I’m writing briefly on Islam’s religious duty to combat poverty and how a new paradigm of managing religious alms may do it more effectively.

In Islam, we have the five pillars of religion. The five pillars of Islam constitute the obligatory foundation of which Muslims must satisfy during their life to prove their devotion to their faith. One of the pillars is Zakah. Zakah is the fourth pillar and can be considered a form of religious alms, mandatory for able Muslims. It is probably the only pillar that puts the focus on a believer’s relationship with their society since the funds pooled from Zakah are then distributed as a part of the state’s social welfare program.

From Islam’s perspective, the poor and the needy (along with the other six eligible recipients) have the right to a small part of the income and wealth of able Muslims. It is through Zakah that the transfer of rights is conducted. Under the mainstream interpretation, Zakah funds are distributed for consumption use by eligible recipients. I’ve been looking for a ruling on alternative use of the funds but haven’t found it yet. Most of the rulings deal with the method of Zakah collection, types of wealth and income subject to Zakah, and the people who are either the donors or the recipients of Zakah. Very little is discussed regarding the method of its management.

Kiva – loans that change lives

The advent of microfinance (especially on microcredit) brings up a new possibility for managing Zakah funds. Instead of for consumptive use, Zakah can be managed and distributed for productive use. It is more sustainable that way, I think, and more people can get out of poverty faster. After each repayment, the Zakah can be distributed again as a new loan ad infinitum, barring default. Profit-sharing schemes (instead of interest-based returns) can be devised since the purpose of the loan is to fund productive business. The profit then can be used for operational expenses incurred by the management. Examples for this type of microlending endeavor include Kiva and Microplace (although one may object due to their interest charging practice, it’s a working model that can certainly be replicated with some modification, like instituting profit-sharing schemes as an alternative to interest-based return).

Perhaps a new paradigm on the management of Zakah is needed for the Muslims to join the world in responding to the call to arms against poverty. God willing.

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