An Islamic Alternative (Zakat) To Poverty Alleviation: The PARSHI Model

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An Islamic Alternative to Poverty Alleviation:

The “PARSHI” (Neighbourhood) Model
Paper Presented By
Dr. S. M. Ali Akkas
Policy Leadership Unit
Ministry of Women and Children Affairs
Government of the People’s Republic of Bangladesh
Email: akkas54@gmail.com, info@cdss.ingeniousbd.org

Web: www.cdss.ingeniousbd.org
Paper Presented in the

International Seminar on
Islamic Alternative to Poverty Alleviation: Zakah, Awkaf and
Microfinance
24-26 November 2006
Sponsors:
Islamic Research and Training Institute, IDB
Islamic Economics Research Bureau
Islami bank Bangladesh Limited
Copyright © CDSS 2000-2009 1

www.cdss.ingeniousbd.org
Abstract
The paper, first, analyses inadequacies of the market mechanism as well as the
current interventions both at government and non-governmental levels under it as tools of
poverty alleviation and points out the need for introducing a continuous basic minimum
initial asset/capital transfer mechanism like Zakah as follows:
Government safety net programs are often seasonal, poorly covered and aptly
regarded as least organized thereby having very marginal impact on poverty. The
important government safety net programs are Food for Works (FFW), Food for
Education (FFE), Vulnerable Group Development (VGD) Program for disadvantaged
women, and Test Relief (TR). It should be noted that the safety net programs are based
on donors’ humanitarian grants with high degree of fluctuations. At the same time, it is
hardly a net transfer mechanism since FFW, the major component of the safety net
programs, is given as wage to construct and repair rural infrastructure.
Market mechanism, on the other hand, has nothing to do with poverty except the poor
receive something by its trickle down effects emanated from higher growth. Setting
safety nets for the poor is an out of the market solution, which has been proved to be
extremely insufficient in taking care of poverty. Government transfer mechanism, another
out of the market intervention, works heavily against the poor favouring more who are in
higher income echelons.
NGOs’ role is generally applauded in their effort to ameliorating poverty situation in

Bangladesh. Target group approach adopted by NGOs faces challenges at least on three
sustainability grounds. These are:
Ultra poor are hardly covered by any of these target group approaches due to reasons
such as: (a) either the people targeted withdraw themselves considering the program
is not suitable to them; and/or, (b) the program organizers find them relatively too
risky to include on recovery grounds. That means, organizations’ sustainability
becomes increasingly threatened by more and more inclusion of ultra poor;
Graduation of the target group people, generally having no asset, has been
exceedingly arduous as they are put in a situation to survive on utilization of a very

small amount of loan hardly more than Tk. 5000/-. This puts borrowers’ sustainability
at stake; and,
The micro-finance institutions are mostly based on donors’ funds, which is not by
nature sustainable.
With the above-mentioned three sustainability grounds, endorsing of “entitlement to a

basic minimum initial asset/capital” seems to be the sin-qua-non of any approach to
poverty alleviation. One can find here the real implication of introducing Zakah in the
economy as the most effective tool to eradicate poverty. Once Zakah creates this initial
asset base, only then one can expect smooth functioning of a financing scheme whatever
might be the size of loan.
Thus, endorsement of “entitlement to basic minimum initial asset/capital” is the sin-

qua-non of any approach to poverty alleviation. Current poverty alleviation programs
lack this vital component in their program design. As a result, all PAPs currently under
application are bound to be unsustainable on grounds of their donor dependence, inability
to provide initial basic minimum ownership-capital and less organizational sustainability
due low capital productivity. Zakah creates such a provision in an economy. It is a
continuous transfer mechanism ensuring transfer of resources from well-to-do to the poor
and needy. Once this basic entitlement is granted, access to credit adds a new dimension
to graduation process of borrowers.
Secondly, the paper provides a model known as ‘PARSHI (neighborhood)’ which

internalizes the local development process by bringing in its fold the institution of Zakah
and microfinance integrated with other mutually reinforcing socio-religious and
economic programs.
Thirdly, in order to validate the model, experiences from practices close to this line
would also be analyzed and presented.

An Islamic Alternative to Poverty Alleviation:

The “PARSHI” (Neighborhood) Model
Dr. S. M. Ali Akkas∗
1. Introduction
In a situation of poor response to the public management of Zakah fund after
enactment of Zakah Act in Bangladesh, there should be a fresh look to the reasons why it
is so and what could be a new approach to organizing collection and disbursement of
Zakah. To this author, public management of Zakah in Bangladesh could not gain
adequate trust because of the nature of the government and the fact that payment of
Zakah by the Zakah Act has been made voluntary. Assuming that the present Zakah Act
will continue to be with same characteristic until a qualitative change in the nature of the
government, the paper attempts to respond to the query in Section-1 why an initiative of
the type of a pilot scheme should be undertaken. Section-2 argues why current safety net
programs of the government and the microfinance activities of NGOs can exert very little
effect on poverty and why Zakah (a regular transfer mechanism) needs to be put in place
to effectively address the poverty issue. Section-3 presents strengths of Zakah as an
effective poverty alleviation tool. While Section-4 deals with who should take the
initiative, Section-5 illustrates how the program should be approached. Section-6 tables a
preliminary thought “PARSHI” – The Neighbourhood Model and Section-7 provides a
brief idea on how to attempt institutionalisation of the PARSHI Model
2. Why Poverty is sustaining in Bangladesh?
2.1 Almost Non-functional Zakah Board in Bangladesh
Zakah collection by National Zakah Board has come down to a million for the past
few years. Zakah administration at governmental level has virtually been non-functional.
This reflects lack of confidence on the government machinery as regards its eligibility of
∗
Policy Leadership and Advocacy Unit, Ministry of Women and Children Affairs, Government of the
People’s Republic of Bangladesh.

collecting and disbursing Zakah. The other most important factor for undertaking
community initiative of Zakah management is the persisting high percentage of below
poverty line population in spite of so-called successful interventions by NGOs. This has
become rather inevitable when the traditional NGOs’ target group approaches face
difficulty in reaching the ultra poor. Following discussions throughout Section-2
summarises author’s recent policy research on the subject.1
2.2 Staggering Poverty Situation in Bangladesh
Bangladesh has been ranked 139 (among 177 countries) in the Human Development
Report 2005 and categorized as one of the poorest countries of the world and worst
performer in South Asia. As per Human Poverty Index (HPI-1), Bangladesh ranks 86th
among 103 developing countries with HPI-1 value 44.1% again being worst performer in
South Asia.2 About half of its population live below poverty level in terms of per capita
daily calorie intake. Poverty line defined accordingly provides a worrisome picture of
poverty situation in Bangladesh. Rural population below poverty line is estimated to be
46% in 1993, which has declined to 40% in 1997. Below poverty line urban population is
reported to be 43.3% and 43.4% respectively during the same period.
Rural Bangladesh
Of the total 98.77 million rural populations in 1999 (model generated), 5.2 million are
ultra poor representing 4.1%. Number of moderate poor is estimated to be 54.37 million
representing 42.7% of the rural population.3
1
Akkas, S. M. Ali (1999). Simulating Role of Zakah in Poverty Alleviation of Bangladesh under a
Dynamic Computable General Equilibrium Model, Policy Studies Series 1, Centre for Development
Studies and Services Network (CDSSnet), Dhaka.
2
HDR 2005 – Country Fact Sheets, Bangladesh,
http:/hdr.undp.org/statistics/data/country_fact_sheets/cty_fs_BGD.html
3
Akkas, S. M. Ali (1999). Simulating Role of Zakah in Poverty Alleviation of Bangladesh under a
Dynamic Computable General Equilibrium Model, Policy Studies Series 1, Centre for Development
Studies and Services Network, Dhaka.

Urban Area
Urban population is estimated to be 28.44 million in 1999 (model generated). Of this,

below poverty line urban population accounts 12.31 million. Among these huge urban
poor, number of ultra poor, very poor and moderate poor are accounted to 1.7 million, 4.1
million and 6.5 million representing respectively 6.1%, 14.5% and 22.7% of total urban
population.4
2.3 Inequality in the Distribution of Govt Transfer
The present outrage of poverty in Bangladesh is conditioned by size and growth of

population, distorted play of market mechanism, and less judicious allocation of
government transfer payment leading to a distribution mechanism which has built-in bias
to transfer resources from the poor to the rich. The study conducted by the present author
shows extremely an iniquitous distribution of government transfers depriving altogether
those household groups (landless and marginal farmers) who badly need it by any
consideration of priority. Landless and marginal farmers representing respectively 4%
and 26% of total household population get zero allocation of government transfer. On the
other hand, medium and high education household group representing 8% and 3% of total
household population appropriate respectively 34% and 38% i.e., 72% in total of the
government transfer payments effectuated in 1993, the base year of the model run.5
Inadequate Government Safety Net programs
Government safety net programs are often seasonal, poorly covered and aptly
regarded as least organised in terms of leakage. The important government safety net
programs are Food for Works (FFW), Food for Education (FFE), Vulnerable Group
Development (VGD) Program for disadvantaged women, and Test Relief (TR). Among
these programs FFW is the largest, but the fastest growing and second largest program is
the FFE. The author’s same study depicts extent and coverage of the safety net
interventions. It is evident that the highest level of delivery of these programs took place
in 1995-96 distributing 1078 thousand metric tons of wheat costing Tk. 13,970.9 million
4
Ibid
5
Ibid

and 70 thousand tons of rice valued Tk. 907.2 million. That means, food grains costing a
total of Tk. 14,878.1 million were distributed in 1995-96. It should be noted that the
safety net programs are based on donors’ humanitarian grants with high degree of
fluctuations. At the same time, it is hardly a net transfer mechanism since FFW, the major
component of the safety net programs, is given as wage to construct and repair rural
infrastructure.6
2.4 Income Inequality through Market Mechanism
Market mechanism, if allowed to work perfectly, is considered to be the most

efficient way of allocating/distributing income and resources among the economic agents.
Thus free-play of market mechanism, without any kind of planned intervention, would
likely to create poverty for those who fail to be in the marketplace for whatever reason.
One of the basic postulates of market mechanism is that resources flow to activities or
economic agents where these can be used most efficiently. Thus market mechanism, in its
pure sense, does not allow being compassionate to specially make provision for resources
to those who are considered to be less efficient. Hence, any program for the poor
designed purely with market character are unlikely to sustain. This is simply because the
programs in question do not
admit that the poor first
Fig-1: Income Inequality through Market
need to be fit for the Mechanism
marketplace and this [high education HH] 24%

2%
happens only when they [med education HH] 6%
16%
8%
have at their disposal a [low education HH] 5%
[illiterate HH] 8%
8%
basic minimum
[non agriculture HH] 17%
27%
asset/capital of their own to 10%
[large farmer HH] 5%
start with. Saying simply [small farmer HH] 9%
17%
7%
that the poor are efficient [marginal farmer HH] 26%
[landless HH] 1%
and that is why they are 4%
0% 5% 10% 15% 20% 25% 30%

entitled to have their access
Shares Hp Shares hhY
to credit is denial of the
6
Ibid.

aforementioned truth. This argument is applicable to the poor irrespective of whether

they are moderate poor or ultra poor. Crippled, physically or intellectually, do not come
within the purview of this argument because they require, in any case, doles for their
survival.
However, market mechanism has nothing to do with poverty except the poor receive
something by its trickle down effects emanated from higher growth. Setting safety nets
for the poor is an out of the market solution, which has been proved to be extremely
insufficient in taking care of poverty. Government transfer mechanism, another out of the
market intervention, works heavily against the poor favouring more who are in higher
income echelons as has already been noticed in Appendix-1.
On the contrary, Zakah is an obligatory social security arrangement for making those fit
who are unfit as market player and also a security for survival of those who will never be
fit for the marketplace.
Fig-1 illustrates clearly the income inequalities prevailing in different categories of

households. Landless household group representing 4% of total population receives only
1% of total household income. Marginal farmer household group being 26% of total
population gets only 7% of total household income. On the other hand, high education
household group representing 2% of total population receives only 24% of total
household income and medium education household group being 6% of total population
gets 16% of total household income. Thus below poverty line rural household population
consisting of landless, marginal and small farmers being 47% of total population receive
only 17% of total household income. On the other hand, high and medium education
household constituting 8% of total population receive 40% of total household income.
Income Inequalities created in the market and by intervention of government transfer
payment are pervasive. More pervasive is the role of government transfer payment than
in the marketplace.7
7
Ibid.

2.5 Marginal Success of NGOs in Poverty Alleviation
NGOs’ role is generally applauded in their effort to ameliorating poverty situation in

Bangladesh. 681 MF-NGOs, whose statistics are available, have in their command
12,696,574 members receiving cumulative disbursement of loan of Tk. 187,339.24
million.8 NGOs, working as micro-finance institutions, are providing loans without
collateral to target group people who were otherwise not considered to be eligible for
bank loans. Recovery rates of loan money stand over 90% in most of the cases. There are
also government-run poverty alleviation programs providing similar as well as variant
kind of services to that of the NGOs and their performance is nonetheless inferior. In
spite of that target group approach faces challenges at least on three sustainability
grounds. These are:
Ultra poor are hardly covered by any of these target group approaches due to reasons
such as: (a) either the people targeted withdraw themselves considering the program
is not suitable to them; and/or, (b) the program organizers find them relatively too
risky to include on recovery grounds. That means, organizations’ sustainability
becomes increasingly threatened by more and more inclusion of ultra poor;
Graduation of the target group people, generally having no asset, has been
exceedingly arduous as they are put in a situation to survive on utilization of a very
small amount of loan hardly more than Tk. 5000/-. This puts borrowers’ sustainability
at stake; and,
The micro-finance institutions are mostly based on donors’ funds, which is not by
nature sustainable.
With the above-mentioned three sustainability grounds, endorsing of “entitlement to a

basic minimum initial asset/capital” seems to be the sin-qua-non of any approach to
poverty alleviation. One can find here the real implication of introducing Zakah in the
economy as the most effective tool to eradicate poverty. Once Zakah creates this initial
asset base, only then one can expect smooth functioning of a financing scheme whatever
might be the size of loan.
8
CDF: Microfinance Statistics, 2002.

2.6 Root Cause in the Failure of PAPs
It has already been mentioned that endorsement of “entitlement to basic minimum

initial asset/capital” is the sin-qua-non of any approach to poverty alleviation. Current
poverty alleviation programs lack this vital component in their program design. As a
result, all PAPs currently under application are bound to be unsustainable on grounds of
their donor dependence, inability to provide initial basic minimum ownership-capital and
less organizational sustainability due low capital productivity. Zakah creates such a
provision in an economy. It is a continuous transfer mechanism ensuring transfer of
resources from well-to-do to the poor and needy. Once this basic entitlement is granted,
access to credit adds a new dimension to graduation process of borrowers.
2.7 Need for Establishing a Reverse Asset Transfer Mechanism
Market system thus represents a transfer mechanism, which has built-in biases to
direct resources from low income to high-income groups. This trend has to be reversed.
Zakah can set such a reverse transfer mechanism.
3. Strength of Zakah as an Effective Poverty Alleviation Tool
3.1 Aggregate Zakah Receipts: Rural and Urban
Fig-2 shows
total amount of Fig-2: Zakah Collectable in Bangladesh
Zakah (Zakah & 160,000
110,517
Ushr) to be 140,000
100,919
91,777
120,000
collected in
83,751
In Million Tk.
76,080
100,000
69,254
65,149
61,175
Bangladesh
57,516
53,187
49,698
80,000
47,213
44,224
during the 60,000

40,000
period under
20,000
simulation. An 0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
amount of Tk.
28,337 million Zakah Bangladesh
may be

collected as Zakah (including Ushr) in the base year of the simulation, which stands at
Tk. 47,213 million in 1998 and becomes Tk.110,517 million in 2010.
3.2 How Much of the Poverty Gap Zakah Can Cover
Strength of Zakah as a poverty alleviation tool depends on how much of the

prevailing poverty gaps would be financed by Zakah proceeds. The strength can be
measured by portion of poverty gap that Zakah can finance at rural and urban areas. This
rural-urban segregation does not have any legal implication but it provides insights on the
effect of interventions pursued on regional basis. The information so received may help
preparing policies which will encourages resources to be transferred wherever these
would be of best use.
It is quite
evident from the F ig - 3 : P e rc e n t o f R u ra l P o v e r t y G a p
Fig-3 that Zakah c o u ld b e c o v e r e d b y R u r a l Z a k a h
collected from rural 1 0 0 .0 %

area can cover only 8 0 .0 %
14.8% of the rural 6 0 .0 %
poverty gap in 4 0 .0 %
2 0 .0 %
1997. The coverage
0 .0 %
rises over time and
97
98
99
00
01
02
03
04
05
19
19
19
20
20
20
20
20
20
becomes 24.7% in
2005. Z a k a h /P o v e rty G a p :R u r a l
3.3 Urban Zakah as a share of Urban Poverty Gap

Per capita urban Zakah receipts covers 67% of the urban poverty gap. The coverage
increases up to 84.3% by the year 2005 as seen in Table-1 and Fig-4. A more elaborate
illustration may also be seen in Appendix-IX.

Table-1: Portion of Urban Poverty Gap can be covered from Zakah

Time 1997 1998 1999 2000 2001 2002 2003 2004 2005
Zakah/Poverty Gap 67.0% 71.4% 70.7% 74.1% 74.6% 75.8% 78.5% 81.3% 84.3%
Source: Model generated data based on simulation run of the 26-Sector CGE model.
The extremely low coverage of poverty gap by rural Zakah receipts shows severity of rural
poverty compared to urban poverty and the limitation of any poverty alleviation strategy solely
based on rural Zakah. This warrants for mitigation strategy with tools beyond Zakah with the
necessary condition that the intervention package must be rural biased and ensures net transfer of
resources primarily from the rich to poor and equally from urban to rural.
3.4 Intervention by Zakah to Eradicate Rural Poverty

Since per capita Zakah availability of rural poor is extremely low (Tk. 365/- in 1997)
compared to rural poverty gap (Tk. 3783/- in 1997), policies are to be devised so that income as
well as Zakah proceeds increase over time. Under a situation of low Zakah receipts per capita,
phased intervention strategies need to be devised to cover different categories of the rural poor
until poverty is totally eradicated. The model simulates percentage distribution of rural ultra poor
(landless households) 4% and rural moderate poor (marginal farmer households 25-26%, and
small farmer households 16-17%) 41-43% over the period of simulation. Of course, if only the
rural ultra poor are selected first for disbursing whole amount of Zakah collected in rural area, per
capita Zakah receipt stands at Tk. 4594/-(1997) which is well above the rural per capita poverty
gap. That means, with an average family size of six members each family is likely to receive Tk.
27,384/- (1997). The amount is nonetheless a small amount to create an asset base for a poor
family.
Step 1: Mobilise all rural Zakah to finance ultra poor– Cut off poverty eradication time 2
years: First year to create their asset base and 2nd year to form working capital.
The model projects that 10.5 years would be required to cover all moderate poor (marginal
farmer households and small farmer households) to bring them above poverty line if each
moderate poor family is provided with Zakah equivalent to the amount planned to be given to an
ultra poor family. Since the per capita income of marginal farmer household population is double
the amount of the ultra poor and thereby the poverty gap being smaller time to be required to

cover this group would be half i.e., 5 (five) years instead of around 10 (ten) years. The period
may lessen further poverty gap with the small farmer households is considered. Per capita income
of small farmer households being four times higher than that of the landless/ultra poor and the
poverty gap with this household group being further narrowed the actual time to be required to
cover all the moderate poor may be even less than 4 (four) years. If creation of asset base and
provision of working capital to these household groups are considered as in line with the ultra
poor, at best 8 (eight) years would be required to bring this moderate poor groups out of poverty.
At this stage it is important to recall that poverty income was defined to include only the calorie
intake. However, after having been covered all the poverty poor under this definition, poverty
may be redefined to include other essentials in the commodity bundle in phases with increase of
income level of the common people.
Step 2: Mobilise all rural Zakah to finance marginal farmer households and then small farmer households (moderate
rural poor) to create their asset base. The second year to form their working capital. Cut off poverty
eradication time 10.5 years.
Step 3: Redefining poverty to include other essentials in the commodity bundle in phases with increase of income level
of the common people.
3.5 Interventions by Zakah to Eradicate Urban Poverty

Urban poverty gap is
estimated to be Tk. 2,666 in Fig-4: Percent of Urban Poverty Gap could be
covered by Urban Zakah
1997. That means both urban
ultra and very poor can be 100.0%
covered by Zakah receipts 80.0%
60.0%
each year. Per capita Zakah
40.0%
receipts by urban ultra and
20.0%
very poor being Tk. 3,756 they
0.0%
can be brought under 1997 1998 1999 2000 2001 2002 2003 2004 2005
immediate intervention for Zakah/Poverty Gap:Urban

poverty alleviation. If so, per
household annual Zakah receipts would be around Tk. 22,536. In 1999 per capita Zakah receipts
by urban ultra and very poor would be Tk 4,221 which would lead to a per household annual

Zakah receipts of Tk. 25,326. The amount, if provided at a time, should form an initial capital for
running at least a subsistent level livelihood possibly without requiring further help in the next
year.
Table-2: Interventions to alleviate urban poverty

Time 1997 1998 1999 2000 2001 2002 2003 2004 2005
Per capita Zakah receipt by
ultra poor 12,686 13,957 14,255 15,382 15,950 16,669 17,744 18,881 20,076
very poor 5,337 5,871 5,996 6,471 6,710 7,012 7,464 7,943 8,446
ultra & very poor 3,756 4,133 4,221 4,555 4,723 4,935 5,254 5,591 5,945
moderate poor 3,409 3,750 3,830 4,133 4,286 4,479 4,768 5,073 5,395
Source: Model generated data based on simulation run of the 26-Sector CGE model.
Assuming that ultra and very poor are covered in the first year of urban intervention
for poverty alleviation, all moderate urban poor can be covered immediately in the next 1
(one) year. That means, within two years time it would be possible to eradicate income
poverty (in terms of calorie intake). This will allow release of urban Zakah money from
the third year to make available for eradication of moderate poverty in rural Bangladesh.
This strategy, if pursued, will lessen the period of eradicating poverty of rural moderate
poor to 5 (five) years instead of 10.5 years.
4. Who Should Take the Initiative?

The first five verses of suratul Baqara tell clearly about who should take the initative
and why. The fifth verse categirically says about those who should take this initiative will
surely prosper. The translation of the verses read as follows:
“A.L.M.
This is the Book, in it is the guidance sure, without doubt, to those who fear God;
Who believe in Unseen, are steadfast in prayer, and spend out of what We have provided for them;
And who believe in revelation sent to thee, and sent before thy time, and (in their hearts) have the assurance of the
Hereafter.
They are on (true) guidance, from their Lord, and it is these who will prosper.”

Whoever possesses the above qualities can join their hands in taking the initiative.
Not necessarily that initiators must be the persons with nisab level income only. Anybody
who wants to contribute (including Zakah) to the cause of Allah out of his or her income
can be member of the Parshi. The Zakah Fund administration can help organize the
Parshi.
5. How the Program should be approached

The program would be more than establishing charitable centres covering area of
population that forms neighbourhood. Basis of the program would be the notable sayings
of the Prophet (S.M) that “those who go to bed leaving their neighbours unfed are not
Muslims”. This will be an initiative, which will work for a hunger-free community able
to discharge their duty as vicegerents of God. The program components may include
Zakah assistance to eligible persons with a view to build enabling environment for them
so that they are able to lead a sustainable livelihood. Assistance, capacity building, socio-
economic and religious orientations for discharging the responsibility of vicegerency
would be some of the important functions of the program. It would be ideal if the
neighbourhood community can be based centring a mosque.
6. “PARSHI” – The Neighbourhood Model - An Overview

PARSHI is a Bengali word, which means neighbours. In Islam taking care of
neighbours has great religious importance. If family is the first tier of Islamic society then
neighbourhood should be the second tier. Normally PARSHI comprises approximately
forty families surrounding a Muslim. PARSHI can be used to mean in broader sense as
well. Then it would mean next locality, village, Union Parishad, Thana, District,
Division, Province or even a country. From the viewpoint of Zakah administration and its
management the wider meaning of PARSHI has great implication.

So far as program components are

Prayer
concerned, PARSHI may consist of the Assistance
following program objectives as outlined Rearing
PARSHI Raising
in the adjacent figure. These program Resourcefulness
objectives clearly spell out nature and Society
Savings
dimensions of the neighbourhood model. Honesty
Along with establishing salat (prayer) Humanism
Investment
and zakah (assistance), caring (rearing,
raising, resourcefulness), organisation building for economic wellbeing (society,
savings), promoting human virtues (honesty, humanism) and undertaking income
generation activities (i.e., investment) are major activities of the model.
6.1 Creation of a Zakah Forum

Zakah Forum may be formed with the persons intending to pay Zakah in each area of
Parshi operation. The Zakah payers should have the belief and understanding that
payment of Zakah individually does not correspond to the Quranic injunction of
establishing Zakah. Moreover, the Zakah payer should have the feeling that taking care of
economically unsound neighbours is a religious obligation. People with this mentality
forming a Zakah Forum can then think for institutionalizing Zakah at local level and can
start implementing Parshi Model.
6.2 Attempting Institutionalisation of the PARSHI Model – A Practical Way

Forward
Motivated by the spirit of discharging the responsibility of Muslim as vicegerent of Allah in
this world, one or few Zakah payers may select their own area preferably centring a mosque to
start operation. Selecting an area around prospective Zakah payer(s)’ own habitation forms
necessary condition of PARSHI. In essence this is a self imposed responsibility motivated by the
world view of Islamic philosophy. Institutionalisation of the PARSHI should start first on
experimental basis. One or few areas may be selected preferably centring mosques where Zakah
payers (shahib-e-mal) want to organise themselves under the proposed Zakah Forum (ZF) to
collect and disburse Zakah as ordained in the Holy Quran. Wherever applicable, the mosque

committee may take this responsibility. An effective motivation that establishing Zakah is a
compulsory religious obligation should be the starting task. This should be followed by forming
Zakah Forum with the Memorandum of Understanding that ZF would be a comprehensive
platform taking care of specific socio-economic and religious activities which will build a model
for hunger-free Muslim community capable of discharging responsibility as vicegerent of God.
Institutionalizing collection and disbursement of Zakah at community level was

emphasized in a seminar organized in July 2000. In that seminar “Parshi” (neighborhood
model) – a concept of Islamic community development - was also presented, discussed
and agreed upon for implementation on a pilot scheme basis. The present author was
requested in that seminar to develop a detail modus operandi of the “Parshi” concept to
fit to the requirements of its implementation as a pilot scheme. This paper is a response
to that exigency bringing forward a workable design that can be thought of for
experimentation.
6.2.1 Who Should Take the Initiative?
Since institutionalisation of Zakah by the state authority under the present socio-
political context is not encouraging in Bangladesh, initiative should come from the
community who believes in and does have the commitment to the role as vicegerent of
Allah.
The first five verses of Suratul Baqara tell clearly about who should take the
initiative and why. The fifth verse categorically says about persons taking initiative who
will surely prosper. The translation of the verses read as follows:
“A.L.M.
This is the Book, in it is the guidance sure, without doubt, to those who fear God;
Who believe in Unseen, are steadfast in prayer, and spend out of what We have provided for them;
And who believe in revelation sent to thee, and sent before thy time, and (in their hearts) have the assurance of
the Hereafter.

They are on (true) guidance, from their Lord, and it is these who will prosper.”9
Whoever possesses the above qualities can join their hands in taking the initiative.
Not necessarily, initiators must be the persons with nisab level income only. Anybody
who wants to contribute (including Zakah) to the cause of Allah out of his or her income
can form Zakah Forum and be its member.
6.2.2 How the Program should be approached
The program would be more than establishing charitable centres covering area of
population that forms neighbourhood. Basis of the program would be the notable sayings
of the Prophet (S.M) that “those who go to bed leaving their neighbours unfed are not
Muslims”. This will be an initiative, which will work for a hunger-free community able
to discharge their duty as vicegerents of God. The program components may include
Zakah assistance to eligible persons with a view to build enabling environment for them
so that they are able to lead a sustainable livelihood. Assistance, capacity building, socio-
economic uplift and religious orientations for discharging the responsibility as vicegerent
would be some of the important functions of the program. It would be ideal if the
neighbourhood community can be based centring a mosque.
6.2.3 “PARSHI” – The Neighbourhood Model
An Overview
PARSHI is a Bengali word, which means neighbours. In Islam taking care of

neighbours has great religious importance. If family is the first tier of Islamic society then
neighbourhood should be the second tier. Normally PARSHI comprises approximately
forty families surrounding a Muslim. PARSHI can be used to mean in broader sense as
well. Then it would mean next locality, village, Union Parishad, Thana, District,
9
The Quran: 2: 1-5.

Division, Province or even a country. From the viewpoint of Zakah administration and its
management the wider meaning of PARSHI has great implication.
So far as program components are concerned, PARSHI may consist of the following
program objectives as outlined in Fig-5.
Abbreviating PARSHI/
The Program Objectives
Program Components:
Prayer 1. Establishing Salat
Assistance 2. Establishing Zakah
Rearing
PARSHI
Raising 3. Caring
Resourcefulness
Societal 4. Socioeconomic uplift
Savings
Honesty 5. Promotion of Human
Humanism Qualities & Human
Human Rights Rights
6. Income Generation
Investment through Growth
Promotion
These program objectives clearly spell out nature and dimensions of the
neighbourhood model. Along with establishing salat (prayer) and zakah (assistance),
caring (rearing, raising, resourcefulness), organisation building for economic wellbeing
(societal, savings), promoting human virtues (honesty, humanism) and undertaking
income generation activities (i.e., investment) are major activities of the model.
Institution of Zakah at Community Level – The Zakah Forum
There should be an institution of Zakah at community level. The persons intending to

pay Zakah at community level in an organized manner may form Zakah Forum and run it
by themselves. The Zakah payers should have the belief and understanding that payment
of Zakah individually does not correspond to the Quranic injunction of establishing
Zakah. Moreover, the Zakah payer should have the feeling that taking care of
economically unsound neighbors is a religious obligation. People with this mind can then

think for institutionalizing Zakah at community level. Memorandum of Understanding of

the institution should spell out that the institution would be a comprehensive platform for
taking care of specific socio-economic needs and discharging religious obligations that
form core of the model to establish a hunger-free Muslim community capable of
discharging responsibility as vicegerent of God.
Formation of Local PARSHI

Institutionalisation of the Parshi should start first on experimental basis. Initially
interested Zakah payers (shahib-e-mal) may form local Parshi within a mosque
command area. Imam of the mosque or a Zakah payer may assume the leadership of the
Parshi. Each and every adult, male and female, should eventually be made member of the
Parshi. But initial members of Parshi would comprise with only of those who perform
salat five times a day. Praying five times a day shall be the necessary condition for being
a member of the Parshi. For the Muslims having income above nisab level i.e., sahib-e-
mal they can be members of the Parshi if the person subscribes the view that paying
Zakah is a religious obligation and the person is ready to pay Zakah. Parshi may be
divided into number of sub Parshis or Parshi Mahallas with one or few sahib-e-mal in
each Mahalla taking care of certain number of below poverty level households.
Therefore, Parshi Mahalla would be the lowest unit under Parshi taking care of all the
socio-religious and economic wellbeing of the Mahalla.
Conducting Baseline Survey of the Parshi

After formation of the Parshi a baseline survey will be conducted to identify and
assess Zakah payers and amount of Zakah to be collected along with people with below
nisab level income and their poverty gaps. The survey will be a comprehensive one to
collect complete demographic data of all households in the Parshi area, practice of their
religion, their education status, and their health and sanitation conditions. On the basis of
the baseline survey Parshi Mahallas would be formed phase by phase.
Orientation on the Role of Muslim as Vicegerent

During or after Jum’a congregation on each Friday, orientation program can be
organized to provide religious discourse on the necessity for establishing Salat and

Zakah, infaq fi sabilillah, and responsibility as vicegerent towards building Islamic

society (ummah) around a Muslim. This should be followed by motivational programs
with a view to introduce with Parshi concept, its necessity and modus operandi.
Making Mosque a Centre of all Parshi Affairs

None of the aspects of human life is beyond boundary of Islam - a concept to be
clarified to each member of the Parshi. Social, economic and cultural life of the Parshi
members must be organized in the light of the sayings of the Holy Quran. A true model
of Islamic community is to be built up within the Parshi area as a model case. The Parshi
should develop within a very short period time as a society, which is educated,
prosperous, hunger-free and peaceful in terms of social security, tranquility and cohesion.
Making Zakah a vehicle for Comprehensive Parshi Development Program

Mechanism of paying Zakah would be associated with a comprehensive Parshi
development program. This will help build up capital base of the below nisab level
people so that they can come out of poverty quickly and can lead a prosperous economic
life helpful to carryout the role of vicegerent in a meaningful way.

PARSHI
Program
Management
To be run by Centre for
Development Studies and
Services Network (CDSSNet)
initially for 3 years
PARSHI
Pilot Program 1
Parshi 1 Parshi 2
Mosque
Parshi 3 Parshi 4
Program Steps PARSHI Program

Components
Prayer 1. Establishing
Formation of Local PARSHI P
Salat
A Assistance 2. Establishing
Conducting Baseline Survey of Zakah
the Parshi Rearing
R Raising 3. Caring
Resourcefulness
Orientation on the Role of S Societal 4. Socioeconomic
Muslim as Vicegerent Savings uplift
H Honesty 5. Promotion of
Making Mosque a Centre of all Humanism Human Qualities
Parshi Affairs Human Rights
6. Income
Making Zakah a vehicle for Generation
comprehensive Parshi I Investment through Growth
Development Program Promotion

7. Conclusion and Policy Recommendations

The foregoing analysis attempts to substantiate that Zakah can be an effective tool for poverty
alleviation in Bangladesh. This presupposes readiness of the Bangladesh society to pay Zakah the
way it has been prescribed in the holy Quran. Islamic Development Bank may support pilot
schemes demonstrating effectiveness of Zakah as a successful poverty alleviation tool based on
Parshi Model concept. This is certainly a preliminary concept and requires refinement,
elaboration and giving concrete shape through discussions. The practical process of refinement of
the idea would be through lessons learnt from field level application.

An Islamic Alternative (Zakat) To Poverty Alleviation: The PARSHI Model

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An Islamic Alternative to Poverty Alleviation:

Email: akkas54@gmail.com, info@cdss.ingeniousbd.org

Paper Presented in the

Copyright © CDSS 2000-2009 1

NGOs’ role is generally applauded in their effort to ameliorating poverty situation in

Copyright © CDSS 2000-2009 2

With the above-mentioned three sustainability grounds, endorsing of “entitlement to a

Thus, endorsement of “entitlement to basic minimum initial asset/capital” is the sin-

Secondly, the paper provides a model known as ‘PARSHI (neighborhood)’ which

Copyright © CDSS 2000-2009 3

An Islamic Alternative to Poverty Alleviation:

Dr. S. M. Ali Akkas∗

2. Why Poverty is sustaining in Bangladesh?

2.1 Almost Non-functional Zakah Board in Bangladesh

Copyright © CDSS 2000-2009 4

2.2 Staggering Poverty Situation in Bangladesh

Copyright © CDSS 2000-2009 5

Urban population is estimated to be 28.44 million in 1999 (model generated). Of this,

2.3 Inequality in the Distribution of Govt Transfer

The present outrage of poverty in Bangladesh is conditioned by size and growth of

Inadequate Government Safety Net programs

Copyright © CDSS 2000-2009 6

2.4 Income Inequality through Market Mechanism

Market mechanism, if allowed to work perfectly, is considered to be the most

marketplace and this [high education HH] 24%

0% 5% 10% 15% 20% 25% 30%

to credit is denial of the

Copyright © CDSS 2000-2009 7

aforementioned truth. This argument is applicable to the poor irrespective of whether

Fig-1 illustrates clearly the income inequalities prevailing in different categories of

Copyright © CDSS 2000-2009 8

2.5 Marginal Success of NGOs in Poverty Alleviation

NGOs’ role is generally applauded in their effort to ameliorating poverty situation in

With the above-mentioned three sustainability grounds, endorsing of “entitlement to a

Copyright © CDSS 2000-2009 9

2.6 Root Cause in the Failure of PAPs

It has already been mentioned that endorsement of “entitlement to basic minimum

2.7 Need for Establishing a Reverse Asset Transfer Mechanism

3. Strength of Zakah as an Effective Poverty Alleviation Tool

3.1 Aggregate Zakah Receipts: Rural and Urban

during the 60,000

Copyright © CDSS 2000-2009 10

3.2 How Much of the Poverty Gap Zakah Can Cover

Strength of Zakah as a poverty alleviation tool depends on how much of the

collected from rural 1 0 0 .0 %

14.8% of the rural 6 0 .0 %

3.3 Urban Zakah as a share of Urban Poverty Gap

Copyright © CDSS 2000-2009 11

Table-1: Portion of Urban Poverty Gap can be covered from Zakah

3.4 Intervention by Zakah to Eradicate Rural Poverty

Copyright © CDSS 2000-2009 12

3.5 Interventions by Zakah to Eradicate Urban Poverty

covered by Zakah receipts 80.0%

immediate intervention for Zakah/Poverty Gap:Urban

Copyright © CDSS 2000-2009 13

Table-2: Interventions to alleviate urban poverty

4. Who Should Take the Initiative?

Copyright © CDSS 2000-2009 14

5. How the Program should be approached

6. “PARSHI” – The Neighbourhood Model - An Overview

Copyright © CDSS 2000-2009 15