Zakat and Economic Justice: Emerging International Models and their Relevance for Egypt (original) (raw)

Zakat, one of the five pillars of Islam, is a charitable donation incumbent upon all Muslims with assets above a specified level. Eight purposes are defined in the Qur'an for the use of zakat donations, of which the most important is the support of the poor and unfortunate. Although reliable estimates of zakat generation are not available, anecdotal evidence indicates that very large sums are generated annually, in the range of several billion or tens of billions of dollars. A debate has arisen in recent years over how to manage and use zakat, encompassing three main areas. First, scholars and practitioners disagree as to whether zakat must be used for direct donation to individuals or can be used to support institutions that serve individuals or to combat poverty through development projects such as microfinance. Second, conservative scholars argue that only Islamic governments can collect zakat, which constitutes one of the few permitted sources of taxes to an Islamic government while reformists promote private nonprofit organizations as equally appropriate. Zakat funds relying on the latter model are spreading in the West, even as professional managers of zakat funds in Islamic countries are moving to explore greater use of financial management and marketing tools drawn from business models. A third issue surrounds the use of a share of zakat collections for program administration by private parties. Other issues include how to respond to demands by reformers for increased transparency and accountability from state or private institutions that manage zakat collection and distribution; how to expand the definition of the purposes for which zakat can be used; and the extent to which zakat can or should serve to redistribute wealth across a society to achieve social justice. This article explores these issues based on field research and a review of the literature to examine current practices, with an emphasis on emerging innovative models of zakat for development (Z4D) management and how they differ from traditional practice. Indonesian and Malaysian experiences, including corporate and publicprivate models, and analysis of emerging US and UK zakat funds provides insights into such new practices. A case study of Egypt is provided based on preliminary field work, interviews with the official zakat organization, Nasser Social Bank, a review of regulations and fatwas issued, and a case study of one highly successful application of Z4D in a Delta village, Tafahna al-Ashraf. The case study sheds light on how the use and management of zakat are evolving in Egypt and points the way to the development of modernized models that build on traditional zakat institutions to meet Egypt's development needs. Reform of zakat along the lines pioneered in Southeast Asia, particularly a shift from traditional charity to incorporate greater support to sustainable poverty alleviation, would potentially mobilize greater zakat donation, raise transparency and accountability, expand the scope for collaboration with community-based civil society groups and corporations, and increase the impact of this central Islamic institution.