Understanding Zakat

Introduction

UK Charities have a potential to raise at least £500 million per annum in Zakat funds. Adam, Bushill-Matthews, (2016).

This paper considers the need for transparency and accountability of these funds, regardless of the Islamic theological approach taken by individual charities. This guide will refer to the common areas where charities should make clear to their stakeholders the policy and practice adopted.

Ethical behaviour is of the utmost importance from a theological perspective and a wider UK charity emphasis with concern amongst donors.

This guide does not discuss the Islamic theological perspectives that the jurisprudence scholars have discussed, theological papers can be referred to. UK Charities should be transparent on the scholarly opinions that adopt.

Zakat definition

Ramadan (the lunar month of the Islamic Calendar) is viewed as the period for spiritual recuperation; healing of the mind, body and soul. It is within this period when Muslims generally fulfil their socio-economic values by paying their Zakat (welfare due).

Zakat is based on a person's accumulated wealth at a rate of 2.5% and given annually. (See section of calculation of Zakat).

“…establish prayers and give the Zakat, welfare due” (al-Qur'an 22:41)

Here the Muslims are presented noble values to put into practice; for the most effective method of socio-economic justice.

To ensure charities also put into practice these noble values and demonstrate the impact of their activities towards socio-economic justice to support the prosperity and security of communities, the following are key considerations for all charities.

Obligation of Zakat

Worship in Islam includes rituals, actions and duties commanded by God and as such includes the five pillars of Islam; belief, praying, fasting, Zakat and Hajj. Islam is based on these five principles.

Zakat is viewed as an act of worship, and a blessing for the giver and the recipient.

“A certain fixed proportion of the wealth and of the each and every kind of property liable to Zakat of a Muslim to be paid yearly for the benefit of the poor.”

The calculation of Zakat for the giver

The accumulated wealth is also referred to as the minimum wealth an individual should have before giving Zakat whilst meeting the other criteria of being an adult and being in sound mental health.

Zakat is only payable if a person has the equivalent of 612.36 of silver or/and 87.48 grams of gold, if an individual has wealth above this value then Zakat is obligatory on him/her at the rate of 2.5%. Al-Kawthari (2002).

Therefore, minimum threshold over which Zakat is payable is based on equivalent of the gold and silver current market prices. If today's gold price was applied Zakat would be payable on net assets over £4,000.

A key aspect in calculation is Zakat is payable on wealth in one's possession for a lunar year.

Zakat payable is calculated on the following 6 assets 1) Gold 2) Silver 3) Cash or cash equivalent 4) Stock-in-trade or goods brought for resale 5) Livestock 6) Agricultural produce

All charities websites have comprehensive guides on calculating Zakat and how to deal with aspects such as shares, loans, business goods etc.

The following is a comprehensive illustrative example of how Zakat is calculated assuming an individual has the assets stated:

“Zakat will be payable on £40,000 at the rate of 2.5%, which is £1,000.”

 Source: Simplified Rules of Zakat (Al-Kawthari, 2002).

A resource to calculate Zakat https://www.wifaqululama.co.uk/financial-numbers/

As Zakat is a regarded as an act of worship, whether the individual pays the Zakat is related to a personal religious perspective of fulfilling the obligations of religion.

References

1. Adam, F, Bushill-Mattews, L. (2018) Zakat is not just Charity: Unlocking the Transformative Power of Islam's Third Pillar. Yaqeen Institute of Islamic Research

2. Khan, M (1994), The Translation of the Meanings of Summarised Sahih Al-Bukhari, Compilation Al-Imam Zain-ud-din Ahmed bin Abdul-Lateef Az-Zubaidi.

3. Al- Qaradawi, Y (1994) Fiqh al Zakat, Dirasah Muqaranah li Ahkamiha wa Falsafatiha fi Dau' al Qur'an wa al Sunnah translated into English by Mushfiqur Rahman as “Fiqh al Zakah,

4. Al-Kawthari (2002), Simplified Rules of Zakat.