Setting the right nisab of Zakat

During the month of Ramadan, there is always an enthusiastic effort among many Muslims to do some charities for the less privileged section of society.  The charity follows a divine decree and is performed in the holy month. Muslims strongly believe that the return of doing some charity in the Ramadan is higher than other months and it is also indicated in Hadtih. As a part of the effort, many able Muslims pay their due Zakat during the month although there is no strict obligation in Islam that Zakat has to be paid during the month of Ramadan. Discussions and events on Zakat become widespread just before the month to make people aware of the issue.

Zakat is the obligatory charity for able Muslims and is one of the five fundamental pillars of Islam. The commandment to establish Zakat is mentioned more than 100 times in Qruan, usually in conjunction with Salah (Namaz or daily prayer). Allah orders Muslims to pay Zakat on their total wealth in excess of nisab, (minimum wealth) to the poor for the welfare  of  society. The basic principle is that wealth owned by people is a trust, not merely for one's own benefit. So, it must be shared with the poor and the needy as they do not have necessary wealth. Zakat is the system designed to distribute the part of excess wealth so that the deprived section of society can be benefited. The ultimate objective of Zakat is to restrict the concentration of wealth among the few and reduce poverty through balanced distribution of wealth. Zakat is thus a fiscal tool in Islam.

Being obligatory in nature for any eligible Muslim, he or she has to pay Zakat in a prescribed manner. Those who have wealth at least equivalent to the nisab after completing all their necessary personal and family spending in their possessions for one lunar year are bound to pay at least 2.5 per cent of the wealth as Zakat. Nisab is the threshold determined on the basis of gold or silver standard. It is either 87.5 grams of gold or 613 grams of silver. (Some Islamic scholars opines that it is 85 grams of gold or 595 grams of silver).

To determine the value of nisab, one has to estimate the market price of 87.5 grams of gold or 613 grams of silver at a particular date. Now, as per the price disclosed by Bangladesh Jewellers Association (BAJUS) on March 7, the price of per gram 22-karat silver is Tk 180 and so, the price of 613 grams 22-karat silver stands at Tk 110,340. If one goes to market to sell the sliver or ornaments of silver will, however, get around 20 per cent less than the calculated price. So, the actual value of the 613 grams 22-karat silver is Tk 88,272. Applying the similar method, the price of 87.5 grams 22-karat gold stands at Tk 677,600 (at the rate of Tk 9,680 per gram and deducting 20 per cent of the value). Now, the estimated nisab is either Tk 88,272 in terms of silver standard or Tk 677,600 in gold standard.

As there is a big difference between the prices of gold and silver, and as the silver price is much lower than gold price, many Zakat experts are in favour of using the silver standard of nisab as it brings more Muslims under the net of Zakat. They further argue that following the silver standard is more beneficial for the poor as maximum amount of Zakat can be mobilised through the mechanism.

The deposits in the country's banks, distributed by the size of the accounts, may give an indication in this regard. The latest quarterly report of the Scheduled Banks Statistics, released by Bangladesh Bank last month, showed that the number of bank accounts having deposits above Tk 0.10 million was 14.59 million at the end of 2023. As some individuals hold more than one bank account and corporate or institutional accounts are also there, the net number of individual bank accounts will be lesser.  So, by silver standard of nisab, around  10 million people may be eligible to pay Zakat.  Again, the number of bank accounts having Tk 1.0 million and above stood at 1.98 million during the period under review. By rough count, around 1.50 million may be considered eligible to pay Zakat.

Some other scholars, however, are for following the gold standard of nisab. They are of the view that by applying the silver standard, those who have small amount of wealth also become Zakat payers. Now, being Zakat payers, none of them are eligible to receive Zakat, although some of them are in need to get financial assistance through Zakat. Gold standard allows such Muslims to be eligible for Zakat.

Against the backdrop, some experts argue that any Muslim is free to determine whether he or she will follow gold or silver standard for nisab. In Bangladesh, various organisations engaged in collecting and distributing Zakat encourage potential Zakat givers to follow the silver standard.  It should be noted that nisab for gold or gold ornaments has to calculate in terms of gold price and nisab for silver and silver ornaments in terms of silver price. Nisab for all other financial assets like bank balance, cash in hand, stocks, bonds etc is in terms of either gold nisab or silver nisab.   Sheikh Al-Qaradawi  in his book The Fiqh of Zakat favours gold standard for the other financial assets.

Once nisab is determined, a Muslim has to calculate the monetary value of his or her gold, silver and financial assets including cash in hand at a particular date of the year. If the gross monetary value is equivalent to the nisab amount or more, then he or she has to pay Zakat at the rate of 2.5 per cent the total wealth. The payment has to made in the prescribed areas and for those who are eligible to receive Zakat. The principle of Zakat asks to make the Zakat recipient owner of the wealth so that he or she can spend it independently and according to their need.  Giving cloths like sari and lungi is not acceptable as Zakat. It is through transfer of cash directly or through any reliable organisation that Zakat should be  distributed. Proper distribution of Zakat is the biggest challenge to make it effective. This column will next focus on the issue elaborately.

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