Economic Institutions of Islam [Archives:2000/51/Culture]

Prepared by:
Ismail Al-Ghabery
Yemen Times
The Muslim community is a practical and caring community. It recognizes the value of material well-being and the fact that people naturally stand in need of one another. The major instrument for ensuring a caring and healthy community is the institutions of Zakaat.
Zakaat and Social Welfare
Fore as long as humans are humans, who have differing capacities and motivations for economic action, there will be some who are poor. Indeed the majority of humankind are now afflicted by poverty.
Every human being carries the Divine amaanah or trust to transform the elements of nature into sources of nutrition and comfort, of wisdom and beauty, efficiency and enjoyment for himself and others.
Built into this amaanah or trust is the requirement on those who have been blessed with wealth and means, to spend out of their substance on those in deprivation and misery. Islam teaches people that the poor and the deprived have a title or right in the wealth of the rich (70:24-25) and constantly exhorts the rich to meet that obligation. In this sense, the rich stand in need of the poor. If they do not fulfill this right or the poor, they will be called to account.
While voluntary sadaqah or charity is encouraged and its scope extended so that even the poor can offer sadaqah (in the shape of a smile for example), Islam has established the institution of Zakaat to make concern for the poor of permanent and compulsory duty.
Zakaat consists of an annual contribution of two and a half percent of ones income or appropriated wealth to public welfare. The rate of zakaat on other types of wealth such as agricultural product and jewelry is more. It is incumbent on minors and adults, males and females, living or dead. After debts, Zakaat is deducted from the inheritance of any deceased Muslim.
A Appropriated Wealth excludes debts and liabilities, household effects (except jewelry) required for living; and land, buildings, and capital materials used in or for production. Zakaat is due on current years income as well as on the accumulated incomes of the past and on all stocks in trade.
Islamic law empowers the Islamic state or community to collect the Zakaat, and keep a distinct account of it, separate from the public funds of the state treasury.
Zakaat funds must be spent on the eight categories specified in the Quran namely, the poor and the destitute, the wayfarer, the bankrupt, the needy converts, the captives, the collectors of Zakaat, and in the cause of God. The last category allows Zakaat funds to be used for the general welfare of the communityfor education of the people, for public works, and for defense of Islam and the Muslim community.
Benefits of zakaat
1. Being religious duty, it offers the donor the inner satisfaction of a duty accomplished. The funds on which zakaat has been paid bring satisfaction and reward in this world and the next; funds on which no zakaat has been paid will bring suffering and punishment in this world and the hereafter. The very word zakaat means sweetening and it implies that those funds on which no zakaat has been paid are bitter. The word zakaat also means purifying.
2. Zakaat makes for social welfare and solidarity and eliminates class and economic barriers, class animosity and hatreds; it eliminates arrogance on the part of the giver and humiliation on the part of the receiver.
3. The need to pay zakaat acts as a stimulus to investment of income in productive enterprise, for capital that is allowed to remain idle would progressively diminish in zakaat levies. Invested in production, it adds to societys wealth and could help in job creation. Zakaat also has the basic meaning to grow: wealth grows with spending and investment.
4. Zakaat is a great promoter of wealth circulation throughout society, which is one of the main features of any healthy economy. The Quran condemns the accumulation and circulation of wealth in the hands of the rich only.

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