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6 years ago

Making Zakat collection and distribution meaningful

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The continued growth of Bangladesh economy along with the rising income disparity makes a case for distributive injustice of resources. Being the second largest Muslim country in the world, Bangladesh can address such injustice by means of promoting Zakat as an effective tool.

In Islam, Zakat is one of the five fundamental pillars. It is a portion of the wealth that Muslims have to pay to the poor and the deprived section of their community every year. Zakat is obligatory to Muslims possessing a certain volume of surplus resources within a certain period of time. There are clear Islamic guidelines in this regard.

By its sheer nature, Zakat is a rules-based system of obligatory charity - not a simple charitable contribution. The Holy Quran clearly states the obligation and outlines the mechanism. A Muslim can not give Zakat without proper calculation and rightly selecting eligible recipients. In Bangladesh, there is a long tradition to distribute clothing among the poor during Ramadan in the name of Zakat. Such practices do not fully comply with the Zakat principles and guidelines.

The core principle of Zakat is to share the surplus resources of eligible Muslims in such way that helps improve the living standard of recipient(s) within a period of time. The ultimate objective is to eliminate poverty and create an equitable society.

Zakat has to be paid on surplus wealth that is left over after the passage of a year, a lunar year to be precise. The rate of paying Zakat is 2.50 per cent of surplus wealth. The minimum surplus of wealth, over which Zakat is charged, is called Nisab. There are two standards of Nisab. The gold standard sets at least 85 grams of gold in possession of a Muslim as surplus after a year, while the silver standard sets at least 595 grams of the metal. Surplus of cash equivalent to any of these standards is counted as Zakat. Even the Nisab volume of non-cash but income generating assets like bond and stock are also subject to Zakat.

Estimating the minimum surplus of wealth or Nisab is, therefore, critical. After meeting all the required expenditures and liabilities from a Muslim's income in a year, s/he has to own Nisab equivalent of wealth. Only then s/he is liable to pay Zakat.

While individual Muslims are paying Zakat, the challenge is to make it effective. Here comes the issue of proper distribution and the economic theory of search friction may help explain the problem. The Nobel Prize (Economics) in 2010 was awarded to Economists Peter Diamond, Dale Mortensen and Christopher Pissarides for analysing and modelling the theory.

According to this theory, there are various forms of imperfections or frictions in the real-world market and these frictions led to mismatch among the buyers and sellers. The reasons behind such frictions include imperfect or inadequate information, slow mobility and lack of coordination. For instance, it is costly for both the workers and employers to match their supplies and demands. Labourers have to spend a lot of time and energies to identify suitable jobs. Employers also need more time and resources to find and review job seekers. Hence, both the unemployed workers and job opportunities coexist at a period of time.

In a similar vein, there exists a kind of gap between the Zakat payers and the Zakat receivers due to lack of adequate information and coordination. So, it is sometimes difficult for individuals to identify the eligible receivers. To overcome this, collective effort seems to be a good solution. Collective effort means a system of collecting Zakat from individuals by an organisation and distributing it transparently among those who actually need it. In this system, the Zakat payers can know where their Zakat is going and who are the beneficiaries.

In Bangladesh, there is a government Zakat fund operated by a board under the Islamic Foundation. During 1982 and 2014, the Zakat board spent Tk 132.25 million with the number of Zakat beneficiaries reaching 718,806.

Besides, several private entities are now working on Zakat management across the country. Centre for Zakat Management (CZM) is one of the leading organisations in this regard that has been organising annual Zakat fair for the last six years to create awareness on collective Zakat distribution. This year, it organised the sixth Zakat fair in the second week of this month.

The CZM is managing Zakat by distributing it under eight types of schemes, including livelihood and human development programme, micro enterprise development, technical training, scholarship programme for undergraduate studies and Hafez-e-Quran, pre-primary and nutrition programme for underprivileged children, healthcare for distressed women and emergency humanitarian assistance. The organisation also maintains transparency as regards its activities with all information available online alongside regular publications.

Quantum Foundation is another voluntary organisation working for mobilising Zakat and distributing the same among those eligible to receive Zakat. Ahsanullah Mission is also managing a Zakat fund. Several other charitable organisations are also in operation to mobilise and distribute Zakat.

While private initiatives to mange Zakat are gradually increasing, comprehensive database on overall activities of various organisations is important. It is, therefore, important to create a database with detailed information about the activities and also to make it accessible for all. It will help the payers know better about such organisations, upon which they can decide on their Zakat receivers.

Indonesia, for example, introduced a Zakat indexing system last year. Titled 'National Zakat Index' (NZI), it tracks the management and performance of the country's Zakat institutions. The NZI measures collection and distribution of Zakat across its value chain - from regional to national levels on an aggregate.

Although Zakat is generally managed by the state in Indonesia, the largest Muslim majority nation, private initiatives are also active there. There are two formal Zakat institutions - state-backed Zakat Collecting Board (Badan Amil Zakat or BAZNAS) and privately-run National Zakat Collectors (Lembaga Amil Zakat or LAZ). The LAZ has been working in coordination with BAZ, but contributing more in Zakat collection and distribution.

Bangladesh can also develop a national index by creating a database on Zakat management organisations and their activities. Transparency is a must to make Zakat management effective.

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