Published:  10:55 PM, 11 May 2021 Last Update: 11:14 PM, 11 May 2021

Zakat and economic importance

Zakat and economic importance
The Arabic word zakat means "sanctity" and "development." A person's mind is cleansed of greed for money and miserliness when he or she gives zakat. In addition, the poor have a claim to a share of the rich's income. Zakat was regarded as a religious duty or tax in Islam, and according to the Quran, it is ranked second only to prayer (salat) in the order of importance. 

Zakat is a moral obligation for all Muslims who fulfill the requisite requirements of wealth to support the poor. It is one of Islam's Five Pillars. It is a legally required charitable donation that is often misunderstood as a levy. In Islam's culture, zakat payment and conflicts have played a significant role. Finally, Zakat is the poor people's right in society. 

Zakat played a significant role in the country's economic growth and equitable distribution of income. Zakat ensures that capital is distributed equally in society. During times of lockdown and pandemics, zakat plays an important role in helping the poor people stay afloat in society. Rich people should pay zakat to staff who are losing their jobs due to the epidemic. 

In this situation, zakat plays a vital role in the lives of the poor. The Zakat Foundation should be more involved in collecting and distributing zakat among the needy. If zakat is allocated correctly, wealth equality can be achieved. How will Zakat play a significant role in the poor people's time lockdown? The government should pay more attention to how zakat is distributed. 

Zakat contributions are currently optional in most Muslim-majority countries, although they are mandatory and collected by the state in Libya, Malaysia, Pakistan, Saudi Arabia, Sudan, and Yemen. The zakat is governed by the government in Jordan, Bahrain, Kuwait, Lebanon, and Bangladesh, but contributions are voluntary.  Zakat is obligatory in Islam for those who are qualified and have sufficient money. The value of all of one's possessions is used to calculate zakat on wealth. It is customarily 2.5 percent of a Muslim's overall assets and wealth over the nisab minimum. 

According to Islamic scholars and development workers, much of the zakat money is mismanaged, wasted, or ineffective. Poor and landless citizens, employees, and their families are highly saved with family to take their daily necessities if it is properly handled and supervised. If zakat is properly handled and distributed among them, they are able to meet their basic needs. 

Zakat al-Fitr, also known as Sadaqat al-Fitr, is a smaller charitable responsibility that must be fulfilled by all Muslims, male or female, minor or adult, as long as they have the financial resources to do so, at the end of the Islamic holy month of Ramadan. The money raised is used to pay zakat collectors and needy Muslims so that they can join the rest of the Muslims in celebrating Eid al-Fitr (the fast-breaking festival) after Ramadan.

Economic growth and zakat have a strong and optimistic relationship. Zakat distribution has a positive impact on economic development. Micro and macroeconomic variables are heavily implied by zakat. In the past, zakat had a greater impact on people's saving and spending habits without impacting their work efforts. Several macroeconomic effects are predicted, including allocation performance, economic growth, income and wealth distribution, poverty eradication, social stability, and stabilization. Zakat selection and distribution can help with micro and macroeconomic issues including consumption, income distribution, and economic development. 

Land, houses, dwellings, stores, factories, factory equipment, machinery, parts, work equipment, tools, office furniture and equipment, cars, vessels, launches, ships, vehicles or livestock for travel or farming, practical vehicles, practical clothes, household furniture and utensils, daily needs, domesticated birds, poultry, and other items are exempt from Zakat. 

Zakat would increase the consumption of basic goods and services while decreasing the consumption of luxury goods and services. Zakat is distributed to the needy and homeless, resulting in a rise in their income due to their low wealth and income. The zakat's revenue and share of the zakat can be used to buy necessities. Zakat, on the other hand, would reduce the wealthy's wealth and profits. The wealthy's wealth and profits may be sacrificed, resulting in lower consumption of luxury goods and services. However, in Islam, those who pay the zakat according to Islamic laws will see their wealth rise more than in the past. 

Paying tax is also necessary for a Muslim citizen because both zakat and tax can be used by the government to develop the country. Zakat is a historically and normatively understood income distribution instrument that has a relationship with macroeconomic policies. 

This encourages each region's government to pay attention to the position of zakat funds administered by the government in each region as a means of reducing poverty. Zakat also helps to maintain government spending and influence Islamic economic policy in order to improve societal economic well-being, especially for those who are poor. 

Writer: Assistant Professor, Dept. of Accounting & Information Systems, Jatiya Kabi Kazi Nazrul Islam University, Bangladesh and Ph.D. Fellow, Zhongnan University of Economics and Law, Wuhan, China.

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