Management of Zakah in Modern Muslim Society
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Islamic Development Bank Islamic Research and Training Institute MANAGEMENT OF ZAKAH IN MODERN MUSLIM SOCIETY Islamic Development Bank Islamic Research and Training Institute MANAGEMENT OF ZAKAH IN MODERN MUSLIM SOCIETY Edited by : I. A. Imtiazi M . A. Mannan M. A. Niaz A. H. Deria Papers presented to the first Seminar on Management of Zakah in Modern Muslim Society held in Karachi, Pakistan during 02-12 Sha'aban 1405 H ( 22 April - 02 May 1985 ). Organized By: Islamic Research and Training Institute Islamic Development Bank Jeddah, Saudi Arabia Pakistan Development Banking Institute Karachi, Pakistan and Central Zakah Administration Government of Pakistan © Islamic Development Bank, King Fahd National Library Cataloging-in-Publication Data Seminar on Management of zakah in modern muslim society ( 1:Karatchi : 1405 ) MANAGEMENT OF ZAKAH 1N MODERN MUSLIM SOCIETY Jeddah. 236 P, 17 x 24 cm ISBN 9960-32-096-0 1- Zakah 2-Islamic economy I- Title 252.4 3348/21 Legal Deposit No. 3348/21 ISBN: 9960-32-096-0 The view expressed in this book are not necessarily those of the Islamic Research and Training Institute nor of the Islamic Development Bank. The view expressed in this book are not necessarily those of the Islamic Research and Training Institute nor of the Islamic Development Bank. References and citations are allowed but must be properly acknowledged. First Edition 1410 H (1989) Second Edition 1421H (2000) ﺑﺴﻢ اﷲ اﻟﺮﺣﻤﻦ اﻟﺮﺣﻴﻢ CONTENTS Page Foreword Introduction I. A. Imtiazi PART I MANAGEMENT OF ZAKAH IN. MODERN MUSLIM SOCIETY . 1. Effects of Zakah Assessment and Collection on the Redistribution of Income in Contemporary Muslim Countries M. A. Mannan 29 Comments Ziauddin Ahmad 51 2. Limitations on the Use of Zakah Funds in Financing the Socioeco- nomic Infrastructure of society S. Ismail Shehatah 57 Comments D. M. Qureshi 74 3. Adjusting Tax Structure to Ac- commodate Zakah Mohammad H Awad 77 Comments Zafar Iqbal 97 4. Recent Interpretations of the Economic Aspects of Zakah Sabahaddin Zaim 101 Comments Aftab Hussain 121 5. Management of Zakah through seimi-Government Institutions. Fuad A. Al-Omar 131 Comments Manzoor Ahmad 153 6. Organization of Zakah The Pakistan Model and Experience. I. A. Imtiazi 157 Comments Abdul Jabbar Khan 177 5 PART II SEMINAR MESSAGE AND ADDRESSES Page Message Late General M. Ziaul Haq 187 Welcome Address Ahmad Mohamed Ali 189 Inaugural Address Jehandad Kah 193 Concluding Address Ghulam Ishaq Kahn 199 APPENDICES i) Recommendations of the Seminar 211 ii) Suggested Issues for Further Research M. A. Mannan 212 iii) Program of the Seminar 227 iv) List of Participants 234 6 FOREWORD As an international financial institution fostering the economic development and social progress of the member countries of the Organization of Islamic Conference and the Muslim communities in non-member countries at large, the Islamic Development Bank, is responsible, inter alia, for under-taking research and training primarily in areas of Islamic economics, banking and finance and other related fields which would further the development of its member countries. It is in realization of this particular responsibility that the Bank established the Islamic Research and Training Institute (IRTI) in 1401H (1981). The objective of IRTI is to undertake research for enabling the economic, financial and banking activities in Muslim countries to conform to Shari'ah, ant to extend training facilities to personnel engaged in development activities in Bank's member countries. The Seminar on "Management of Zakah in Modern Muslim Society", held in Karachi, Pakistan during 2-12 Sha'baan 1405H (22 April -2 May 1985), was organized in partial fulfilment of the Institute's objective. On behalf of IRTI I would like to acknowledge with gratitude the contributions made to the seminar by the co-organizing institutions in Pakistan, namely, Pakistan Development Banking Institute (DBI) and Central Zakah Administration (CZA), Government of Pakistan. Thanks are also due to all resource persons, paper writers, commentators, and participants from OIC member countries who made the Seminar a success. I would also like to acknowledge the contribution of Br. C. P. Saleem of IRTI for the painstaking effort he rendered to the editors in the publication of this volume. Finally, I do hope that this document will contribute to the growing literature on Islamic economics and will help meet the needs of students as well as the interested public in the vital area of Islamic economics. Dr. Mohammed Aslam Niaz Officer-in-Charge, Islamic Research & Training Institute 7 8 PART I MANAGEMENT OF ZAKAH IN MODERN MUSLIM SOCIETY 9 10 INTRODUCTION I. A. Imtiazi * 1 - Here an attempt is made to provide a broad overview of six papers presented at the seminar and the comments and discussions which followed at the International Seminar on the Management of Zakah in a Modern Muslim Society held in Karachi from 22 April to 2 May 1985. In this Seminar a number of thought-provoking issues concerning various aspects of Zakah were mooted and debated. Zakah : Its Economic Potential 2 - M. A. Mannan's paper entitled " Effects of Zakah Assessment and Collection on the Redistribution of Income in Contemporary Muslim Countries " generated much useful discussion. In the paper, Mannan observes that while Zakah may add to consumption demand in the economy by redistributing income from the rich to the poor, it is also likely to stimulate investment by checking the tendency to hoard idle cash, thus adding to the production of goods and services of common use for the poor, rather than luxury goods for the rich. Furthermore, in his view, Zakah- financed projects in fields such as education, medical care, social welfare etc., will raise the productivity of the poor. Higher productivity so attained coupled with the multiplier effect will raise the real income of the Zakah recipients by a multiple of investment. However, in order to enable the institution of Zakah to realize its potential, particularly in regard to the alleviation of poverty and the reduction of income and wealth disparities, he moots a number of ideas which, in his view, will make larger resources available to the poor and also improve the quality of Zakah proceeds utilization further. Extension of Zakah Base 3 - One such question relates to the expansion of the list of items liable to Zakah which can be restated as follows : a) Originally when Zakah was instituted as a religious obligation, a num- • Mr. I. A. Imtiazi was the Administrator General, Central Zakah Administration, Government of Pakistan, Islamabad, Pakistan. 11 ber of items were exempted from Zakah on the assumption of their being required for bonafide personal use, e.g. ornaments, dwelling houses, consumer durables, etc. This assumption no longer holds good in many cases in the modern Muslim society. People are found frequently indulging in " conspicuous consumption " and keeping such items, on the ostensible but untenable, pleasure of personal need, much in excess of what may be regarded as a socially desirable limit. In order to counter this, the following proposals were advanced : i) Guidelines be developed at the national level to determine the size and composition of an average family in a particular social con-text, at various income levels; and to define the standard of living at the subsistence, sufficiency and comfort levels; ii) Then limits be set on what in a particular social context an average family, at a particular income level, may be allowed to keep to maintain its standard of living at a certain level. iii) Assets kept over and above the limits so set, be subjected to Zakah the obligation of which the asset-owner may be motivated through appropriate Islamic education, to accept and discharge on a voluntary basis. b) When precious metals like silver and gold were made liable to Zakah these were the- only two precious metals which either per se or in the form of their coins or manufactures were used generally as stores of value. Currently, a number of metallic items. (e.g. platinum) and nonmetallic items (e.g. diamond, sapphire and other precious stones and gems) are being used as stores of value like silver and gold. Therefore he argued whether these new stores of value be made liable to Zakah or whether the asset-owner be motivated to accept and discharge on a voluntary basis as socially tolerable maxima items of personal need, or whether such a list of nontraditional items liable to Zakah be reviewed every 5 years to keep abreast of changing times. 4 - Two precedents have been quoted in support of the proposition : one that of Hazrat Umar Ibn al Khattab who is reported to have levied Zakah on horses, while it was not levied before; and the other, that of Hazrat Umar Bin Abdul Aziz who levied Zakah on all minerals, acting on a ruling by Imam Ahmad Bin Hanbal. Although the purpose of Mannan is not to pronounce judgement on the issues raised but to unfold them providing the Shari'ah scholars some food for thought, one has to face a set of complex problems at the operational level. 12 Revision of Nisab 5 - Again, with a view to enlarging the scope of resource transfers from the rich to the poor via Zakah, Mannan has mooted another question which he calls " Vertical Assessment of Nisab ". Mannan raises a question as to whether all the Zakatable assets be valued; then their values be added together; and then if the combined total value of all the Zakatable assets, irrespective of genus, exceeds the silver-based or gold-based nisab, Zakah be levied. The Hanafite doctrine favours combining silver and gold for the purposes of determining nisab,, should each of them be below nisab, but taken both together be above nisab, fixed for each of them.