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Zakat and Economic Justice:

Emerging International
Models and their Relevance for

Takaful 2013
Third Annual Conference on Arab Philanthropy and Civic Engagement
June 4-6, 2013
Tunis, Tunisia

Dr. Jennifer Bremer

Professor of Practice and Chair,
Department of Public Policy and Administration
American University in Cairo
Zakat, one of the five pillars of Islam, is a charitable donation incumbent upon all Muslims with assets above a specified
level. Eight purposes are defined in the Quran for the use of zakat donations, of which the most important is the
support of the poor and unfortunate. Although reliable estimates of zakat generation are not available, anecdotal
evidence indicates that very large sums are generated annually, in the range of several billion or tens of billions of
dollars. A debate has arisen in recent years over how to manage and use zakat, encompassing three main areas. First,
scholars and practitioners disagree as to whether zakat must be used for direct donation to individuals or can be used
to support institutions that serve individuals or to combat poverty through development projects such as microfinance.
Second, conservative scholars argue that only Islamic governments can collect zakat, which constitutes one of the few
permitted sources of taxes to an Islamic government while reformists promote private nonprofit organizations as equally
appropriate. Zakat funds relying on the latter model are spreading in the West, even as professional managers of zakat
funds in Islamic countries are moving to explore greater use of financial management and marketing tools drawn from
business models. A third issue surrounds the use of a share of zakat collections for program administration by private
parties. Other issues include how to respond to demands by reformers for increased transparency and accountability
from state or private institutions that manage zakat collection and distribution; how to expand the definition of the
purposes for which zakat can be used; and the extent to which zakat can or should serve to redistribute wealth across
a society to achieve social justice.
This article explores these issues based on field research and a review of the literature to examine current
practices, with an emphasis on emerging innovative models of zakat for development (Z4D) management and
how they differ from traditional practice. Indonesian and Malaysian experiences, including corporate and public-
private models, and analysis of emerging US and UK zakat funds provides insights into such new practices. A case
study of Egypt is provided based on preliminary field work, interviews with the official zakat organization, Nasser
Social Bank, a review of regulations and fatwas issued, and a case study of one highly successful application
of Z4D in a Delta village, Tafahna al-Ashraf. The case study sheds light on how the use and management of
zakat are evolving in Egypt and points the way to the development of modernized models that build on traditional
zakat institutions to meet Egypts development needs. Reform of zakat along the lines pioneered in Southeast
Asia, particularly a shift from traditional charity to incorporate greater support to sustainable poverty alleviation,
would potentially mobilize greater zakat donation, raise transparency and accountability, expand the scope for
collaboration with community-based civil society groups and corporations, and increase the impact of this central
Islamic institution.

Zakat is one of the five pillars of Islam, the elements of the faith that are obligatory for all believers. Zakat is the only
pillar that deals with finance and also the only one that relates directly to Islamic governance. Unlike the statement
of faith (the shahada), the five daily prayers (salat), fasting during Ramadan (sawm), and the pilgrimage to Mecca
(the haj), zakat is an obligation to society and to specific classes of individuals within that society.
Zakat is unique among the five pillars in that it cannot be performed alone. While each of the other pillars
unquestionably plays an important part in Islamic societies -- shaping rituals of faith that bring Muslims together
Jennifer Bremer

as families (to break the Ramadan fast), as a community (to pray, especially in the Friday prayer), or as a broader
society (joining in the annual haj pilgrimage or the lesser omrah as representatives of the global umma community)
-- zakat is the only pillar that requires the participation of others beside the person performing it: there must be a
receiver as well as a giver. Each partner in the zakat exchange must perform his or her own duties and meet the
obligations of the zakat system in order for the other partner to fulfill his or her role.
The zakat obligation is fundamental to the concept of social justice in Islamic society. Payment of zakat establishes
a direct link between the well-off in society and those in need. Zakat is not only a means of providing for the social
welfare of those at the bottom of society, but also a practical mechanism to set some limits around inequality. As
zakat obligations are based on assets, at least in principle, payment of zakat transfers a share of the assets of
those who have accumulated wealth to the poorest.
The structure of zakat thus explicitly promotes equity and social justice by working at both ends of the income spectrum.
At the upper end, zakat serves to prevent over-concentration and excessive accumulation of wealth by mandating
that a share of all wealth remaining in the donors hands at the end of the year over and above the familys needs
be redistributed to those in need. At the lower end, it specifies the categories within the needy population that should
receive assistance. Although the rate of zakat assessment, 2.5 percent (one-fortieth) for the most common forms of
assets, may not seem to be a very high amount, over time, it can make a significant contribution to equity, but, as will
be discussed in some detail later in this paper, that contribution can come at an equally significant cost in the form of
reduced growth if zakat is devoted exclusively to supporting short-term consumption.
Zakat, used properly, has the potential to foster a greater degree of equality within society, putting a floor under
the living standards of the poorest members of society, but also slowing the accumulation of wealth by those who
51 are generating a surplus beyond their requirements and thus contributing to social equity.
This paper examines how Muslim societies are reshaping the institutions of zakat to make it a more effective tool
for social justice and development in the modern world. Its aim is to explore the use of zakat to fund development
programs that have a lasting impact on poverty and social inequality, as opposed to the short-term consumption
impact of distributing cash or in-kind donations to individuals.
The need to reexamine such a key institution as zakat is urgent because the current period constitutes an
extremely challenging time for Muslim societies, particularly in the Middle East. We are witnessing an era that is
bringing to power governments with a strong Islamic, even Islamist, ideology. At the same time, social change
and economic stresses are raising the salience of issues such as social justice, equity, poverty, job creation, and
growth. Governments in the region have failed for decades to address social equity concerns effectively, and
early indications of how Islamist parties will perform are hardly more encouraging in this regard. At the same
time, civil society and philanthropic institutions in the region are evolving rapidly (John D. Gerhart Center, 2008),
but the ability of civil society to contribute to addressing these urgent challenges depends to no small degree
on the availability of resources. Many organizations have historically been reliant on Western funders, but the
international donors have thus far not been able to reach a modus operandi with the new Islamist governments,
nor are the latter welcoming to foreign funding, at least to date.
This combination of pressures on social equity institutions makes it imperative to reexamine every tool available to Muslim-
majority societies to address social justice. Traditional funding mechanisms, in particular, must be reexamined to find ways to
support civil society and development programs more generally, including those, such as zakat, that have been widely used
by Islamist organizations, drawing on their own international as well as domestic sources (Siam, 2012).
Zakat is not only one of the most important of these tools, but it is one that has itself been going through a
period of innovation and critical reexamination during the past two decades, although primarily in Muslim-majority
countries outside the Middle East. In the West and in the Far East, Muslim leaders in the private sector and civil
society and Islamic scholars are reconsidering the implications of the Islamic principles of social justice, Islamic
governance, and Islamic economics for zakat management in the modern era. This reexamination is part of
a broader consideration of how Islamic principles can be applied more concretely, making the transition from
idealized religious and historic models into operational institutions that can meet the very real challenges of the
present. It has arguably progressed more rapidly among Muslim communities in the West and Southeast Asia,
but is really just beginning in the Arab world. The political changes witnessed over the past two years, and by
no means concluded at this writing, press Arab leaders to join the search for solutions to pressing social and
economic problems. Throughout the past decades of failure to achieve inclusive broad-based growth and social
justice, Muslim commentators in the Arab world could attribute these shortcomings to the generation of Mubarak
and Ben Ali, their Western supporters, and the corrupt regimes that they created. Now that the Islamists have
themselves moved into positions of power, they cannot escape the responsibility to address the social justice,
governance, and economic challenges facing the Middle East.
In confronting the huge reform challenges before them, it is natural for the new Islamists to look to the experiences
of other Muslim-majority countries -- Turkey, Malaysia, Indonesia, and others -- that are repeatedly turning in high
and quite steady rates of growth, addressing poverty, and making progress on governance. Seeing their success,
it is appropriate to ask, what can be learned from these experiences about how Islamic institutions can contribute
to the remaking of Arab economies, societies, and governance.

Jennifer Bremer
Although this paper limits its consideration to one such institution, zakat, it deals with issues central to these
broader concerns. As zakat is an institution at the heart of Islam not only as a religion, but as the source of
development approaches from Islamic finance to Islamic social justice, zakats effectiveness and its contribution
to progress on the Islamic reform agenda are both of the highest importance.
The remainder of this paper will be organized around how zakat as an institution is to be governed and how
zakats potential as a tool for economic development and social justice can be realized. Following a discussion
of the hypotheses and conceptual framework underlying the analysis, it explores new models and emerging
experience in countries outside the Middle East and, within the region, in Egypt. The discussion closes with a
brief consideration of several current controversies that relate to how zakat is to be generated, managed, and
distributed, with a specific focus on issues affecting Zakat 4 Development (Z4D).
The first section, addressing emerging practices in zakat governance, examines the organizational models being
used to govern the collection and distribution of zakat. In this area, the key controversy surrounds the question of
public vs. private institutional roles. To address this controversy, the paper will look at the growth of private zakat
institutions in the West, in Southeast Asia, and in Egypt. How can these models contribute to increasing the flow
of zakat, which is self-evidently a precondition to achieving significant increases in impact?
The second section examines zakats potential as an economic development tool. It considers, first, the effect of
zakat payments and receipts on the return to capital and thus on the growth of assets. It presents the economic
rationale for repositioning zakat from the traditional model of unconditional cash transfer to a model that puts
greater emphasis on generating an economic return, the pathway to transforming zakat recipients ultimately
into zakat donors. Second, it considers how zakat could be put to work more effectively to realize this potential 52
and to become a contributor to economic development. Finally, it addresses one of the main controversies
that surrounds use of zakat for development: to what extent can zakat be devoted to economic development
projects or programs rather than only to individual-to-individual transfers? To address this question, it looks
at recent rulings, at new models developed in zakat programming outside the Arab world, and also at some
promising experiments in Egypt.
The final section considers how zakat institutions are addressing the challenges of modernizing zakat, including
how a number of controversies in zakat management are being dealt with. The most important of these is arguably
the redefinition of the eight Quranic categories of recipients eligible for zakat to broaden the utility of zakat to
address the needs of a 21st Century society. In matters of religious doctrine, especially in Islam, there will always
be many who argue for the strict interpretation of how zakat is to be implemented, particularly with regard to
matters that are dealt with very specifically in Quranic language. Nonetheless, a great deal of creative rethinking
is also emerging to reinterpret the categories and other Zakat requirements in light of modern social needs.

Study hypotheses and conceptual framework

Although all of the evidence available suggests that most zakat is intended by the giver to be used for short-term
consumption, this use does not fit well with the role assigned to zakat in Islamic doctrine as a means to build
social justice and equity. This paper explores alternative distribution mechanisms, with a specific emphasis on
how zakat can contribute to economic development. Charitable support to short-term consumption needs of the
poor -- zakats main intended beneficiaries -- can undoubtedly relieve the burden of poverty, but such assistance
cannot achieve a sustained improvement in their lives, lift them out of poverty, nor contribute in a meaningful way
to the broad-based, inclusive economic development that is the best and arguably the only path that can lead a
society as a whole out of poverty.
On the contrary, to the extent that zakat redirects resources from long-term productive investment into short-term
consumption, the improvement in living standards by the zakat recipients will come at the cost of growth in the
economy over the long-term. The inescapable implication of this logic is that an overemphasis on charity as a
strategy for managing zakat will over time undermine the very aim of zakat, which is to promote a more equitable
and socially just society, by raising the living standard and dignity of those at the bottom of the income distribution
and by promoting continuing advancement within the society and the economy, which includes social justice.
How, then, can zakat be directed to have a greater impact on development? This paper offers an exploratory
analysis of this question, based on the following two hypotheses:
H1 - Use of zakat is evolving through the creation and application of new models that
increase impact on development, including greater zakat use for income generation
in contrast to charity, emergence of innovative collection and distribution institutions,
particularly outside the government, and better governance.
H2 - Egypts zakat institutions are participating in this evolution, perhaps not to the full
extent needed to maximize zakats effectiveness as a development tool, but in ways
that contribute to the global repositioning of zakat.
Jennifer Bremer

The study reported here applied a three-part methodology to gather evidence for the assessment of these two
hypotheses. First, a literature review was conducted focused on the use of zakat for development. Although there
is a tremendous volume of writing on zakat, only a small portion of it focuses on Z4D or issues related to this topic.
Even so, this is a fast-evolving area of analysis and writing within the Islamic finance and development literature,
drawing increasing attention from scholars; no claim is made to an exhaustive review of this literature, particularly to
the newest work in Arabic and Asian languages (Malay, Bahasa Indonesia, Hindi, Urdu, Bengali, etc.).
Second, information was collected on new zakat models, new institutions, and innovations in zakat governance
by analyzing information on the websites of selected public and private zakat institutions, primarily in the
Middle East, United States, United Kingdom, and Indonesia. In the case of the United States, publicly available
information in selected tax returns and annual reports of a selection of the zakat institutions identified were also
analyzed. Particular attention was given to the current status and evolution of zakat models in Egypt on the basis
of interviews with experts and officials involved in zakat, examination of models developed, a review of recent
fatwas on zakat, and preparation of brief case studies of several noteworthy examples of innovation. While most
of the case studies are in line with global experiences, one case examines the experience of a Delta village,
Tafahna al-Ashraf, that has quite literally transformed itself over the past twenty years through a locally-initiated
and locally-led Z4D process.
Third, based on the information collected, an analysis of the options for strengthening Z4D programming was
conducted with the aim of identifying recommendations for advancing zakats effectiveness as a tool for economic
and social development in Egypt and the Islamic world more generally. This analysis addressed two main sets
of issues: 1) improvements to the governance of zakat institutions and 2) Z4D strategies to maximize zakats
53 potential as an economic development tool.
Because much of the analysis presented is based on secondary sources, this article will not follow the usual
structure of literature review-methodology-data analysis. Instead, the article will be organized around the two main
sets of issues identified above- governance and economic development- and discussion of the literature will be
integrated into each of these. Following this introductory section, each of those will be dealt with in turn. The article
will conclude with a discussion of the implications of Z4D for national development strategies in countries with a
large Muslim population, and possible next steps in both research and practice.
Figure 1 presents the conceptual framework (CF) developed to guide this analysis. It represents the Z4D
relationships among zakat institutions, uses of zakat, recipients of zakat, and its impact. The CF traces the four
key programming choices to be made in applying a zakat for development strategy:
1. What institutions will collect the zakat and carry out the programs?
2. What mechanisms will be used to provide funding and other services to support economic activities?
3. How will beneficiary participation in Z4D be structured?
4. What impact will these programs have on the outcomes targeted by zakat?
Each of these programming choices carries its own set of issues, both practical and doctrinal, which will be
explored briefly in this paper.
As shown in Figure 1, two different types of institutions for zakat management may be involved in Z4D programs.
First, there are those organized around a particular economic strategy, such as the development of small and
midsize enterprises (SMEs), agricultural development, incubation of high-tech or high-growth-potential startups,
etc. For these programs, Z4D is an additional tool that can be applied to assist some but not necessarily all groups.
They may or may not be using zakat at present (more likely not).
The second type of institution addresses individuals rather than businesses, providing assistance to low-income
people to help them out of poverty. This assistance may include training in job skills and other income-oriented
assistance, as well as welfare assistance targeted to low-income peoples immediate needs, such as food
distribution, healthcare, housing assistance, etc. Although the latter is not usually considered to be economic
assistance, it should not be considered as entirely separate from it, either. For many poor people, urgent or chronic
problems such as malnutrition, poor health, and lack of adequate housing greatly impede their ability to find and
hold employment, run a micro-business, or keep children in school.
On the other side of the coin, in countries such as Egypt, almost every poor family has members who work one
way or another, however sporadic, informal, and low-paid such work may be. Lacking access to a functioning
safety net, they simply have to work to survive.

Jennifer Bremer

These two types of programs -- those aimed at businesses and those aimed at individuals-- overlap in the area
of microenterprise, including microfinance. By definition, the microentrepreneur is an individual usually living in
poverty or close to it. Although the institutions providing micro-credit may consider themselves as belonging firmly
to the first category, economic development, for their clients the distinction may be quite meaningless. Indeed,
the failure of microfinance programs to recognize and deal with the reality that many microentrepreneurs have
urgent family welfare problems, or are only an illness or accident away from financial calamity, arguably limits the
effectiveness of such programs as a pathway out of poverty).
Moving to the second column in Figure 1, we argue that Z4D programs can make use of a variety of different
zakat distribution mechanisms, which, like the institutional options shown in the first column, may be directed to
current or potential business owners, to workers and their families, or to both owners and workers (and many
microenterpreneurs are both business owners and employed somewhere else).
Seven assistance approaches are identified, although in practice an effective program would generally combine
several if not all of these. Building on the points made above, the second category of Z4D tools offers assistance
that is potentially important for small business owners as well as workers. Not all of the former are by any means
assured of earning a reliable income that meets the zakat standard of a dignified standard of living for their families.
Two categories of assistance make up Z4D. The first is assistance to current or potential business owners,
which may include financial assistance taking various forms, and management assistance, which would generally
provide training or technical assistance. Three principal types of financing can be provided using zakat, including
qard hassan (interest-free loans), equipment grants, and equity grants. Both of the first two are well known and
widely used in zakat programs, but the third category is generally not found in the literature. A key point argued
here is that, for the small business or microenterprise, equity grants are in fact the most useful form of assistance
and the one best suited to zakat.
Before turning to discuss these financing mechanisms in somewhat more detail, however, it may be useful to
explore briefly what types of economic activities are encompassed within the concept of Z4D. Although most
programs appear to focus on microenterprises, the current fascination of many donors, in fact the development
of midsize enterprises is essential for the creation of well-paying jobs and for economic growth in general.
Like the villagers in Garrett Hardins famous Tragedy of the Commons, microenterprises may enter a limited
market in competition with each other without actually increasing the total income generated. Each new firm
simply takes a small part of the market of every other entrant, eking out a small income for himself at the
expense of further impoverishment of his peers. When congestion and other costs rise beyond a certain
point(as may happen when too many vendors cluster in a limited space, for example), gross and net income
may even fall as the number of entrants increases but customers are driven away not only from the vendors
themselves, but from other shop and businesses in the area.
While microenterprises and programs to support them undoubtedly have a role to play in economic development,
they are hardly a one-size-fits-all approach to income generation and other models deserve greater attention.
Such models include not only the full range of private enterprise structures sole proprietorships, family-
owned businesses, partnerships and joint stock corporations, etc. but also potentially other collective
structures such as cooperatives. Cooperatives may bring together formal or informal small and micro-
Jennifer Bremer

enterprises for collaborative investment, purchasing, or marketing as well as individuals, depending on their
purpose and sector.
Whether corporation or cooperative, these models for collective action permit the business to begin on a larger
scale than a simple microenterprise and to mobilize a greater level of experience and management expertise,
yet do not tie the business down with a large wage-bill in its early days (because owners do not get paid fully or
indeed may forgo payment entirely until the business begins to turn a profit).
As the Tafahna al-Ashraf example discussed below demonstrates, nonprofit enterprises such as schools and
hospitals can also be supported with zakat and can make an important contribution to local economic development,
job creation, and expansion of services to local communities. For reasons of brevity, these various forms will
not be discussed further here, but many of the mechanisms discussed apply equally to for-profit and nonprofit
enterprises, both of which are recognized as important to development and social justice.
A degree of controversy surrounds the use of zakat and other tools of Islamic philanthropy to support these
ventures, however, as discussed in the third section below. In particular, the use of zakat for construction,
institutional development, or other applications that do not directly transfer the funds zakat as an asset to the
poor and destitute, the primary targets for zakat giving, raise doctrinal issues. Controversy also surrounds
the use of zakat to support program administration where the implementer is not an Islamic government.
A review of zakat and other Islamic finance websites suggests that qard hassan programs are among the most
common programming components used. Their popularity may owe more to the desire to emulate microfinance
or to the perceived absence of alternatives than to the effectiveness of such programs or their suitability to
zakat financing. Indeed, qard hassan programs may fail both of these tests, particularly as they are connected
in the case of zakat financing.
The first problem arises because a condition of zakat validity is that the recipient become the owner of the funds
provided, whereas a qard hassan is a loan. Various sophistries can be used to get around this, but at the end of
the day it is not possible to impose a sanction for failing to return the funds, which undercuts the program.
Second, the inability to charge interest means that other funds must be found to cover administrative costs and any
losses to preserve the value of the fund. Both of these problems can generally be addressed by relying on the amil
portion and/or supplementing the zakat with sadaqa or other funds that have fewer constraints than zakat.
Grants of equipment, such as carpentry tools, are an established element in zakat programs (as discussed
extensively in Ibrahim, n.d.), having been part of zakat practice for centuries. Sarif and Kamri (2009, 478) quote
a commentary of al-Nawawi, a leading collector of hadiths from the 13th Century, to the effect that, A craftsman
would be given an amount sufficient to buy tools and equipment that allow him to work and gain his sustenance.
Grants of livestock also fall within this category, as does any item that permits the zakat recipient (the mustahiq)
to generate income. Today, this approach may also be preferred to cash to ensure or at least encourage the use
of the support for income generation rather than consumption.
The third approach discussed here, grants of equity, do not appear to have been used systematically. This is
difficult to understand as equity is more valuable than equipment, because it can be put to any purpose, and is
more consistent with the rule of tamleek, being an owned asset.
Grants of equity must be managed in a way that maintains a certain degree of pressure, whether social or financial,
on the recipient, however, to ensure that the funds are used to build the business. Several of the mechanisms that
could accomplish this have other important advantages, moreover, and would be likely to increase the programs
effectiveness overall. These include:
The possibility of repeat infusions of equity over time, with future grants conditioned on how well the first
grants are used;
Continuing collaboration with the business in ways that go beyond the grant to include advice, business
relationships such as purchase of the goods, etc.; and
Formation of partnerships or cooperatives such that the investors pool their zakat to launch an enterprise.
This last approach has the potential to accelerate growth, as the enterprise starts at a higher scale, can benefit
from partners diverse skills, and can exert social pressure through the other partners to keep each recipient on
track. As with any enterprise with multiple shareholders, care would be necessary in assembling the investors
to ensure, to the extent possible, that they are all committed to the business, that they each bring an important
skill, and that they are trustworthy. Such an approach could be particularly effective in enabling preexisting
groups, such as women participating in a longstanding rotating credit and savings association (ROSCA or
Egyptian gamaiyya), to start a collaborative revenue-generating business, such as a tailoring workshop or
cheese-making operation. Continuing involvement of the donor as an advisor and, after the zakat investment
ceases, even as an investor would also be desirable.
It should be noted that there is no reason to assume that the zakat recipient(s) are starting a new business,

Jennifer Bremer
rather than buying into an existing one. For example, grants of zakat could be used to enable workers in a small
enterprise to become co-investing partners over time, provided that all of the other zakat provisos are met (such
as the lack of benefit to the donor). This might be especially appropriate for small enterprises where the owner is
retiring without a family member to take it over, in which the zakat payments would eventually leave him with a
retirement fund and the workers as the business owners.
While zakat can be used to finance training and management assistance directly, it is perhaps better to look
for ways that in-kind donations of services can be used to meet this need. This approach was also used
in Tafahna al-Ashraf, with formal pledges of assistance being solicited from professionals resident in the
community. Such assistance would more commonly be treated as sadaqa rather than zakat, however. Use
of zakat to fund third-party services may also raise tamleek problems to the extent that the small business
owners do not place sufficient priority on such services. In the authors experience, small enterprises are
rarely willing to pay the market price for technical assistance or training and the small scale of their business
may in fact make such expenditure unprofitable.
The second type of distribution mechanism applies zakat to the benefit of both workers and owners. It applies
standard zakat payments to the purpose of assisting the small businessperson to generate income by addressing
the constraints that often undermine business success. The following categories exemplify but may not exhaust
such applications:
Debt relief: use of this standard zakat category could assist small business owners or workers to get
out from under debt accrued from previous business-related or personal financial setbacks, thus giving
them a fresh start.
Insurance systems: mutual insurance programs, such as takafol, address an important barrier to business
success and continued earnings by low-income community members, whose lack of assets makes them
highly vulnerable to such setbacks as theft or fire.
Skills training: voluntary use of zakat payments to buy a place in a training program can constitute an
investment in the future success of a worker or business owner.
Health payments: low-income workers and small business owners are often more subject to health
issues (their own or their family members), which can derail the business or their ability to work;
payments for medical treatment, another standard zakat use, can thus support the business as
well as the individual.
Income support: While the business is in the early stage of establishment, building up production and
sales and incurring investment costs, there may be a need for continuing some level of income support
for the owner and for those workers eligible for this assistance; by separating this support from equity
infusions, at least conceptually, the distinction between the two types of support would remain clearer,
which would help to promote sound management of both types of financial transfer by the recipient.
One of the most intriguing debates in the field of zakat is the distinction made by some authors between what is
permitted with respect to the first four categories (the poor, the needy, converts, and the zakat collectors) and to
the final four. As discussed in Senturk (2007,130), these last are differentiated by use of a different preposition
and by being stated as a purpose (freeing of slaves, serving the cause of Allah, and assisting those in debt or
stranded travelers). The former are considered, in this interpretation, to be governed by the rule of tamleek (they
must receive and exercise control over the resources as individuals) and to have, in effect, an ownership interest
in the zakat even before it is given, and therefore a right to receive it. The latter, however, do not have these
rights and thus zakat may be expended on their assistance indirectly, for example by supporting an institution that
delivers services to people in these categories.
This distinction has perhaps been a driving force behind the reinterpretation of these categories to permit, for
example, supporting research or education that frees minds or the society more generally from the slavery of
ignorance, or by interpreting refugees as equivalent to stranded travelers, as discussed in the third section below.
The category of serving the cause of Allah is arguably the one most subject to reinterpretation, however.
Depending on the author, it may be defined as anything from support to jihad fighters to broad support for social
programs and institutions, such as schools and hospitals, extending to construction and general operation, as
well as to the direct delivery of services.
These interpretations and the flexibility inherent in the zakat collectors portion open the door to using zakat
to support a wide range of institutions that support economic development through training, education,
investment in income-generating projects, and so forth. They thus implicitly permit the comingling of zakat
funds with funds from other sources.
As discussed elsewhere in this paper, zakat institutions in Indonesia have institutionalized such comingling
through the concepts of ZIS (zakat-infaq-sadaqa) and ZISWAF (adding the waqf or endowment mechanism
as a repository for zakat as well as other proceeds from charitable giving or income generating activities).
Jennifer Bremer

The proceeds of infaq and sadaqa contributions -- which are voluntary and, unlike zakat proceeds, are not
bound to specific uses -- can be used to fund institutional vehicles within which zakat distributions to the poor
more effectively, covering administrative expenses or other program elements that are not zakat-fundable.
For example, infusions of zakat as equity into a business owned by the poor could be coupled with training
programs or marketing assistance, say, funded by the other charitable tools or by funds from non-religious
sources. The institutions managing both types of funding can themselves be supported by the collectors
portion and/or by resources from infaq, sadaqa, awqaf, or from any non-religious source (as also discussed in
the third section below).
In the search for institutional models that can meet the more complex requirements of economic development
in the 21st Century, the flexibility of the waqf mechanism deserves greater recognition. Unlike other charitable
institutions, zakat-based or otherwise, the waqf structure positively requires that the investment be used to
generate income, as this is a prerequisite to having funds to allocate to the charitable purpose.
What is even less recognized, moreover, is that the investment side of waqf management can be as important
in expanding economic opportunity and social equity as the charitable activities funded. For example, a waqf
formed by a donation of urban land can be used to establish a facility for local small businesses, with the revenue
going to provide healthcare for their families, training for their workers, or other purposes that support both equity
and growth. Such models were extremely common in medieval awqaf, which often found a mosque or hospital
surrounded by small businesses renting shops built with waqf resources on the waqf land and providing revenue
to support the mosque or hospital. Modern financial management offers a broader range of creative financing
tools to leverage the asset base of the waqf for inclusive growth than did medieval or even Ottoman finance,
57 particularly in view of the entry of major banks and investment houses into Islamic finance.
Global trends in governance of zakat: emergence of new
institutional models
Although no modern state relies on zakat as the basis of its public finance system, the state plays an
important role in zakat implementation in many Muslim-majority countries. In contrast to the other pillars of
the Islamic faith, the institution of zakat is established by law in sixteen of the worlds forty Muslim-majority
countries (Powell, 2009, 59).
It must be stressed that such legislation does not necessarily make zakat legally mandatory. Egypt is an
example of a state in which zakat collection is carried out by several state-owned entities, most notably the
Nasser Social Bank, but zakat remains voluntary and private zakat collection mechanisms are also very
widespread, particularly through mosques.
Table 1, adapted from Powell, compares the zakat system in a number of Muslim-majority countries, showing in
which countries payment of zakat is mandatory vs. voluntary and in which countries the state has established
institutions for the collection of zakat.

Table 1. Zakat systems in Muslim-majority countries

Country Voluntary Mandatory Gov't agency
MENA (n=15)
Algeria x
Bahrain x x
Egypt x x
Iraq x
Jordan x
Kuwait x
Lebanon x x
Libya x x
Morocco x
Oman x
Qatar x
Saudi Arabia x x
Sudan x x
Tunisia x
UAE x x

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Yemen x x
Subtotal, MENA 12 4 8
Non-MENA (n=19)
Azerbaijan x
Bangladesh x x
Burkina Faso x
Chad x
Gambia x
Guinea x
Indonesia x x
Iran x
Malaysia x x
Niger x
Pakistan x x
Senegal x
Sierra Leone x
Somalia x
Tajikistan x 58
Turkey x
Turkmenistan x
Uzbekistan x
Subtotal, non-MENA 16 2 4
Total (34) 28 6 12
Source: Moneyjihad website and Powell (2009).
Conversely, where zakat is mandatory, the state collects it. Pakistan and Saudi Arabia are both examples of this
combination. Even where zakat is mandated, however, government collection agencies are rarely if ever the only
channel for zakat. Despite the existence of a formal system, mandatory or not, individuals may choose to make
direct donations as part of their effort to ensure that they meet their zakat obligation, especially where they may
feel that the receipt of donations to the government system by qualified recipients is not ensured.
The degree to which zakat is mandatory is an area of evolving practice. For example, Sudans Zakat and Taxation
Act made zakat mandatory in 1984 (Otto, 2010, 217). More recently Egypts now-disbanded parliament had been
considering a bill to recreate the Bait al-Mal (an Islamic equivalent to the national treasury, which collects and
distributes zakat as well as various taxes; Suleiman,2012; see Namawi, n.d., for a description of this institution and
its role in zakat). A news account of this proposal merits quoting at length because of the potential importance of this
development and the insight it gives into the give-and-take in legislation on Islamic matters in post-revolution Egypt:
One bill, proposed by MP (Member of Parliament) Mohamed Talaat, provides for the
establishment of a Bait al-Mal treasury-house which would collect money paid
annually by Egyptian Muslims as zakat and ushur religiously-decreed charitable
donations and tithes. Talaat declared that the establishment of this institution would
signal the beginning of the dream of the restoration of the Islamic Caliphate. His
bill was approved by parliaments religious affairs committee, chaired by the FJPs
(Freedom and Justice Party) Sayed Askar, and forwarded to a sub-committee for
drafting. However, two key amendments were made: paying zakat into the Bait al-Mal
would not be obligatory, but voluntary; and the new institution would not replace the
existing tax authorities, as the bill originally envisaged. Former state-appointed Chief
Mufti of Egypt Nasr Farid Wasel applauded the initiative and a proposal to establish
a board of trustees to oversee the fund. He revealed that the Dar al-Ifta [the Egyptian
institution headed by the mufti and responsible for issuance of authoritative fatwas]
had itself put forward a similar idea in 1997, but it was blocked at the time by parliament
and the Cabinet then as now headed by Prime Minister Kamal al-Ganzouri.
(Kassab and Khawly, 2012)
It is difficult to say whether this bill will be reintroduced through the new parliament or Shura Council, when finally seated.
At this point, there is substantially more innovation in the governance of zakat through private channels. The
expansion of the Muslim population in the West and the rising financial well-being of many families in this diaspora
Jennifer Bremer

community have led to the creation of zakat institutions in the U.S. and the U.K. over the past several years. It
is difficult to form a clear picture of the magnitude of this new activity, but data collected and analyzed from the
Foundation Centers database of the mandatory reports made by nonprofit organizations and foundations to the
U.S. Internal Revenue Service (Form 990s), gives some idea of how zakat funds are growing.
For this analysis, zakat funds were identified through two procedures. First, the Foundation Center listings were
searched for the term zakat, which not surprisingly occurs in the names of several organizations that collect zakat.
Second, a web search was conducted to identify additional organizations and then to seek their IRS 990 reports
in the database (this report is mandatory for all nonprofits seeking a tax exemption). The results of this analysis
were then compiled for analysis.
It must be stressed that it is highly likely that a number of funds were missed; no claim is made that these figures
capture the total zakat giving through institutional channels. The information is more useful as an indication of
how some of the more prominent funds are growing and the increase in the number of funds that are explicitly
focused on collecting zakat, although not necessarily exclusively.
This count also excludes both zakat payments that are made through mosques, which are not required to report
to the IRS under the U.S. rules on the separation of religion and the state, and zakat payments that are distributed
privately. Based on the management of zakat in other countries, it can by hypothesized that these two flows
account for the largest share of all zakat payments.
Tables 2 and 3 summarize the results of this analysis. Whereas in 2001 only one institution was identified as
collecting zakat and this organization, the Islamic-American Zakat Foundation, reported less than $39,000 in
59 assets; by 2010 there were eleven organizations with a total of $46.7 million in assets. Between 2009 and 2010
alone, four new organizations appeared and the assets more than doubled. A wealthy Californian IT entrepreneur
accounted for most of the asset increase, however, establishing a fund of over $17 million.
Most of the funds examined individually also showed strong growth, as can be seen in Table 2. With the exception of
one fund that supports a specific research program, the funds turned in annualized growth rates of 10-59 percent.
These programs differ in their charitable programs, as might be expected, with some giving both domestically and
internationally and some focusing on one or the other. Several appear to be diaspora funds that focus their giving
in the donors country of origin.

Table 2. Asset growth by major zakat organizations in the U.S. through 2010

Organization Assets in first Latest asset First Latest Annualized

year (US $) value (US$) year year growth rate
Zakat Foundation $17,514,292 $17,514,292 2010 2010 NA
Indian Muslim Relief and Charities $1,345,772 $13,659,032 2003 2010 39.2%
Life for Relief & Development $1,301,707 $4,167,518 2002 2010 15.7%
Hidaya Foundation $233,416 $3,724,146 2002 2010 41.4%
Zakat Foundation of America $44,329 $1,140,674 2003 2010 59.0%
ICNA Relief USA Programs $664,880 $978,273 2006 2010 10.1%
Zakat and Research Foundation $303,495 $251,211 2002 2010 -2.3%
Islamic-American Zakat Fdtn. $38,792 $100,518 2001 2010 11.2%
Total 41,535,664
Source: Foundation Center 990 finder and authors calculations

Table 3. Growth of zakat collections selected zakat organizations in the United States, 2001-2010

Year Total assets (US $) Number Average assets (US $)

2001 38,792 1 38,792
2002 1,888,391 4 472,098
2003 3,433,431 6 572,239
2004 5,677,709 6 946,285
2005 9,052,393 7 1,293,199
2006 11,447,905 6 1,907,984
2007 19,156,690 8 2,394,586
2008 6,365,805 8 795,726

Jennifer Bremer
2009 22,717,283 7 3,245,326
2010 46,671,824 11 4,242,893
126,450,223 64 1,975,785
Source: Foundation Center 990 finder and authors calculations
The evolving practice regarding charities in the United States and the UK has encouraged these funds to pursue
norms of transparency, governance, and disclosure that are much higher than seen in Egypt or most other non-
OECD countries. Many of the organizations post several years of annual reports on their websites and a number
of those examined participate in such charity transparency initiatives as Guidestar. Although the quality of the
websites naturally varies, several of them provide extensive information on such governance-related factors as
program strategy, board composition, and administrative expenses.
The emergence of international zakat institutions has also changed the face of zakat giving. Organizations
such as Islamic Relief are active in many countries. The American affiliate of this organization, Islamic
Relief USA, describes programs in the United States and several other countries (such as Pakistan, Egypt,
Palestine, and East Africa). Although many of the programs described resemble zakat programs and an
unknown proportion of donations may be intended as zakat by the donors, only $156,000 out of total
programming of over $36 million is specifically identified as zakat, all of it distributed in the US (IRUSA,
2012, 25).
IRUSA is an affiliate of Islamic Relief Worldwide, which is headquartered in the United Kingdom. The latter
organizations consolidated report (IRW, 2012) states annual income of UK 82 million (US$ 134 million) in 2011,
a substantial increase from the 2010 figure of UK 69 million (US$ 101 million). Although a comparatively small 60
amount of this is directly identified as zakat (including UK 363,000 from the Kuwait Zakat House and UK
263,000 from IR Mauritius), it is reasonable to assume that many individual donations were in fact zakat payments.

The Islamic Relief Worldwide network was established in the UK in 1987 and now works in 30 countries. In
addition to the UK operation, the IRW network includes affiliated IR entities in Belgium, Canada, Germany,
Italy, Malaysia, The Netherlands, South Africa, Sweden, Switzerland, the US, and Australia. The network
also works through: 1) registered offices in Ireland and Mauritius, 2) independent legal entities for program
implementation in Bangladesh, Egypt, India, Kenya, Pakistan, 3) its own offices for project implementation
in Afghanistan, Albania, Bosnia and Herzegovina, Chad, Egypt, Ethiopia, Haiti, Indonesia, Iraq, Jordan,
Kosovo, Lebanon, Libya, Malawi, Mali, Niger, the Occupied Palestinian Territories, the Russian Federation,
Somalia, South Sudan, Sudan, Tunisia, and Yemen, and 4) partnerships for project implementation with local
organizations in India, China, Sri Lanka, and Japan.

This network is certainly the largest global network as measured by institutional presence, but it is not possible to
say where it falls in comparison to other zakat collection and distribution organizations, given the non-transparency
of reporting by many of the funds in the government sector.

Within Egypt and the Middle East more generally, new models are also emerging. Box 1 summarizes two different
models for zakat collection that have emerged recently.

Box 1. Examples of new initiatives distributing or collecting zakat in Egypt
This web-based initiative, whose name means no poverty, was established by Mohamed El-Sawy,
a well-known social activist. Its aim is to motivate donations, volunteering, and other collaboration
in support of established charities. Although the website does not specifically mention zakat, the
procedures described (identifying cases, following up to ensure impact, targeting the poorest)
suggests at the least a zakat origin. This initiatives website also describes its planned mechanism
for distributing funds collected as being linked to three organizations that are quite involved in zakat
collection and distribution and are widely seen as having religiously conservative leadership: Al-
Orman, the Food Bank, and Resala.

National Bank for Development charitable accounts
AMEinfo (2013) reports that, The state-owned NBD has established a program of al-kheir accounts.
These accounts are described on the website as an account opened by NBD in cooperation with ADIB
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[Abu Dhabi Islamic Bank] for the benefit of charities such as Childrens Cancer Hospital, Resala Institute
and Dar Al Orman where the customers donate is in this account (Sadaka- Sadaka Gareya- Zakat).
ADIB is a publicly traded bank with substantial ownership by the Abu Dhabis leadership and state
investment vehicles. ADIB has a joint venture bank in Egypt and, according to its website, its UAE bank
also permits customers to make zakat payments by mobile phone and offers zakat advice by mobile.

Elsewhere in the Middle East, the zakat fund of the United Arab Emirates sets a standard for transparency,
providing fairly up-to-date quarterly financial reports as well as other information such as the board members
and strategic plan on its website (UAE Zakat Fund 2013). This information makes it possible to calculate a
reliable figure for government zakat disbursements for 2011, the last full year reported, broken out by category
and number of recipients, as well as amounts dedicated to each category. A summary of this information is
provided in Table 4. In 2011, the fund distributed the equivalent of US$ 229 million, including US$ 55 million for
the poor, US$ 45 million for students, US$ 29 million for the sick, and US$ 23 million for college students, the
four largest categories.

Table 4. Zakat distribution by the UAE Government Zakat Fund for 2011

Category Percentage of Percentage of cases Average payment

funding (US$)
(see note)
Low income 24.5% 34.7% 20
Students 19.7% 38.7% 15
Illness 12.6% 7.2% 50
College students 9.9% 0.7% 406
Women married to 8.2% 1.5% 155
Divorced women 3.4% 0.8% 115
Elderly 3.4% 1.2% 80
Indebted 3.1% 0.9% 98
Orphans 3.1% 1.0% 89
Widows 2.9% 0.9% 95
Unemployed 2.6% 2.3% 33
Converts 2.4% 4.0% 17
Prisoners' families 1.9% 0.5% 103
Special needs 1.7% 0.6% 78
Zakat al-fitr 0.6% 4.8% 4
In distress 0.2% 0.1% 99
Total 100.0% 100.0% 29
Five largest categories 74.9% 89.4%
source: UAE Zakat fund website (2013) and authors calculations
Note: although the number of cases is not identified as being presented in thousands,
the assumption is made that this is the unit in which cases are presented, given that
the numbers do not appear reasonable if calculated as units.
While the current categories of recipients adhere quite closely to the eight specified categories, the funds
strategic plan indicates an intention to reposition the funds giving to take a more developmental direction. Further
information on these plans, if they have been pursued, was not available, however.
The greatest innovation and expansion into developmental program by zakat funds is taking place not in the
West or in the Middle East, however, but in Southeast Asia, particularly in Indonesia and Malaysia. For reasons of
space, this section will focus on the former.

Jennifer Bremer
Zakat collection in Indonesia is carried out by public sector collectors, private zakat collectors, Islamic organizations,
and mosque-based committees, as well as being distributed directly by individuals without using any intermediary.
The presence of large-scale Islamic membership organizations is a key and somewhat unusual feature of Islam
in Indonesia. The two largest organizations, Muhammadiyah and Nahdatul Ulama, have 30 million and 40 million
members respectively (Markus, 2013). These organizations have long been active in zakat management. Public
zakat management organizations were institutionalized in the Suharto regime, the first step being taken in 1968
with the creation of a committee under the governor of Jakarta (Alfitri, 2005). These evolved into the establishment
of a hierarchical nationwide system of collection committees, usually referred to as BAZIS (based on their Bahasa
Indonesia acronym; the national apex organization is also referred to as BAZNAS). BAZIS were not established
in some of the major provinces until as late as 1985, however (Alfitri 2005). Although private organizations began
to emerge specifically to collect and manage zakat in the 1990s, a law governing this activity was only adopted in
1999 (Law 38, the Law of Zakat Management). Alfitri attributes this to the ambiguous relationship between Islam
and the state under Suharto. National unity in Indonesia, the worlds largest Muslim-majority nation, confronts
serious challenges from the high diversity of a population spread over more than a thousand islands and large
Christian and animist minorities.
The emergence of a private equivalent to BAZIS, termed LAZIS, likewise predated the adoption of the first law
governing them (Law 38). A new law was adopted in 2011 that appears to shift the emphasis back to a guiding
state role in zakat collection, however. Law 23 of 2011, which requires private organizations to register with the
national BAZNAS. Although nineteen of the larger organizations had been able to accomplish this by mid-2012
and have complied with the audit and disclosure requirements, smaller, localized committees have not all done
so, which exposes them to criminal prosecution as well as fines (Rohmah, 2012).
The development of modern private sector institutions to collect and distribute zakat is generally traced to
Dompet Dhuafa (purse of the poor), which began as an initiative of the Republika newspaper group in 1993
(PIRAC, 2002). Over the past two decades, it has grown from an employee-initiated effort to collect zakat in
response to a local emergency into the Dompet Dhuafa Republika Foundation. It has become a diversified
charitable and economic development organization that uses sophisticated fund-raising and management
techniques to collect and distribute approximately US$ 4.9 million in zakat annually, accounting for nearly half
of their total fund-raising of US$ 10.3 million (based on the annual report figure for 2011, the latest full-year
report available online, Dompet Dhuafa, 2013).
In 2006, Dompet Dhuafa briefly merged with the main government zakat institution, BAZNAS, to establish Baznas
Dompet Dhuafa Republika (Candra and Rahman,2010). This collaboration, designed to take advantage of the
superior management and reputation of Dompet Dhuafa and the outreach network of BAZNAS, lasted only for a
year, however. Efforts to reform state involvement in zakat continue, however, possibly reflecting problems such
as the heavy involvement of BAZNAS in corrupt electoral campaigns, extensively discussed by Buehler (2008).
It should be noted that much of this activity took place in locally governed institutions outside the direct control of
the national BAZIS, however. Lessy (2009) also provides an extensive discussion of the relative merits of public
and private zakat collection in Indonesia.
The successful fundraising experience of Dompet Dhuafa and other private zakat pioneers led to the growth of a
range of LAZIS institutions. These include a number of zakat funds established by private corporations, including
international oil giant Chevron, Islamic bank Bank Syariah Mandiri, and development foundations such as Rumah
Zakat (House of Zakat) and YDSF (Al-Falah Social Fund Foundation); see website listings in Table 5 for these
and other links. Large organizations such as Dompet Dhuafa also collaborate with corporations to manage their
zakat and other contributions. PIRAC (2002, 73) report that Dompet Dhuafa had 62 corporations signed up for
such programs, both local and international.
Private zakat flowing through the LAZIS far outstrips contributions to the state BAZIS system. Lessy (2009, 112)
reports that the top six LAZIS, of which Dompet Dhuafa was the largest, collected 236 billion Indonesian rupiah in
2008, compared to just 16 billion collected by the BAZIS. Fifty-two percent of this private funding was accounted
for by zakat and 39% by their awqaf (but these figures are slightly understated because a zakat-waqf breakdown
was not available for the smallest LAZIS).
As demonstrated in the PIRAC case studies, several of the Indonesian institutions display an important trend
visible in the global development of zakat institutions, specifically the evolution from bodies with a narrow focus
on zakat into diversified fundraising and programming entities that collect all types of Islamic contributions and
partner with corporations and international development organizations.

Table 5. Selected examples of zakat institutions

Institution Country Development Link

Islamic Relief Egypt Egypt yes
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Nasser Social Bank Egypt yes
Zakat Foundation of Egypt Egypt
Zakat Foundation of India India
Baitul Maal Hidayatullah (BMH) Indonesia yes
Dompet Dhuafa Indonesia yes
Dompet Peduli Ummat (Fund for Care Indonesia yes
of the Umma)
ICMI (Indonesian Assn. of Muslim Indonesia yes
Intellectuals) laznas-bmt-icmi-dan-jamsostek-beri-
LASNAS BSM (Bank Syariah Mandiri) Indonesia yes
Lembaga Amil Zakah Nasional Indonesia yes
PKPU Lembaga Kemanusian Nasi- Indonesia yes
Rumah Zakat Indonesia yes
YDSF (Al-Falah Social Fund Foun- Indonesia yes
Crescent Medical Aid - Kenya Kenya http://www.crescent-medi-
Zakat House of Kuwait - Egypt office Kuwait
Zakat Fund - Lebanon Lebanon yes
Tabung Amanah Zakat MMU Malaysia
Qatar Charity Qatar yes http://www.qcharity.og
Zakat Fund of the UAE UAE
Human Relief Foundation UK
Islamic Relief Worldwide UK yes
Muslim Aid UK yes
National Zakat Foundation UK
Helping Hands for Relief and Devel- US/
opment Canada
Hidaya US/Can-
Islamic Circle of North America US/
Canada Donation.php?a=relief&b=&c=Zakat
Islamic Relief USA US/ yes
Canada zakah/
Islamic-American Zakat Foundation US/
Life for Relief and Development US/
Canada Server
Muslim Welfare Center US/ http://www.muslimwelfarecentre.
Canada com
Zakat Foundation of America US/ yes
Canada development-sadaqa-jariyah/

More recently, leading Indonesian organizations have begun to establish awqaf, Islamic endowments. Candra and
Rahman (2010) provide a case study of Dompet Dhuafas experience with its waqf, which is managed more like

Jennifer Bremer
an investment fund than a traditional land-based waqf. In 2004, the government adopted Law 41, the awqaf law, to
structure and provide oversight to the waqf movement. Dompet Dhuafa was formally recognized as a waqf shortly
after its founding in 1994, however.
Many of the Indonesian programs place a strong emphasis on economic development, supporting small
businesses and providing training for job-seekers, for example, even though the activities may be categorized into
the traditional eight categories. Lessy (2009, 106) notes that private LAZ institutions, such as Dompet Dhuafa,
Pos Keadilan Peduli Umat, and RZI, are structured using modern zakat management techniques that enable them
not only to fulfill the immediate needs of society, but also to launch long-term programs to empower the poor.
A number of recent publications by Islamic scholars call for the broader use of such hybrid zakat institutions,
combining zakat, infaq, sadaqa, and waqf (or ZISWAF, as it is termed in Indonesia). Atia (2009) discusses zakat
used in combination with sadaqa and Islamic loans (qard hassan). El Dalys dissertation and path-breaking study
of Islamic philanthropy in Egypt (2003) explore the revival of the waqf, among other strategies. M. Hassan (2010)
proposes a model to fund micro-finance using a combination of zakat and waqf. Yumna and Clark propose a
similar model based on the case of Indonesia
It may be hoped that these new organizational structures will serve as models for zakat institutions in the Arab
world. The experience in Tafahna al-Ashraf demonstrates the potential to transform a community through the
systematic generation of zakat and its application to wealth-building programming rather than solely or even
primarily to subsidize consumption. Considering these points in further detail is the aim of the next section.

Zakat as a tool of Islamic economic development
Zakat is the pillar of the faith most closely tied to Islamic economics, to Islamic public finance (to the extent that
such a field can be said to exist), and to the Islamic state itself. Zakat is considered to be the principle Islamic
tax and the foundation of Islamic public finance. Ausaf Ahmed (1996, 74-75) quotes Mohamed Ariff as follows:
It has been accepted the system of zakat occupy a pivotal place in the fiscal theory
and policy of the Islamic economy. The rightful and correct place of zakat system is
in the realm of government finance. The system of public expenditure and taxation in
an Islamic society will have to be designed and adjusted to take account of a zakat
system in operation. That is why, zakat occupies a pivotal place in the theory of fiscal
policy in Islamic economy.
In examining the economic impact of zakat, it may be useful to consider each of the linkages that connect zakat
to its impact. In order for zakat to play its intended role in redistributing wealth from rich to poor, each of three
functions must be performed reasonably well: 1) sufficient funds must be collected to meet the needs of at least
the first two categories, the poor and the destitute, 2) the distribution of the funds must reach the appropriate
beneficiaries, and 3) the impact of the funds received on the beneficiaries must actually be effective in raising their
standard of living. El Daly (2010, 37) points to the distinction in this regard between the level needed for survival
(hadd al-kefaya) and the higher level of sufficiency for a decent standard of living (hadd al-kafaf).
The first issue has attracted a great deal of attention in the vastly deep zakat literature, but most of it considers
how the donor should calculate his or her zakat obligations, rather than how much zakat would in principle be
needed to raise all of a societys members to the level of kafaf or even kefaya. Thus one can find extensive
discussions going into excruciating detail on the rules for zakat, the amount due under different conditions, how
to calculate ones obligation, how to interpret for the modern world rules developed at a time when financial
institutions and instruments were much less complex than they are now, and so forth.
Less attention is devoted to the second issue, ensuring that the funds are distributed to those who are qualified to
receive them, although this has become more complex in the modern era as well. In a traditional society, where
communities were small and there were daily contacts between rich and poor, it was much easier to identify
recipients who met the first two categories in particular, compared to the situation in modern societies, where
the rich and poor live in increasingly segregated communities with declining personal interaction across income
classes. This difficulty may in part explain the growth of formal institutions, both private and governmental, that
take responsibility for collecting zakat from the donor and channeling it to appropriate recipients, a topic that will
be discussed in some detail later in this paper.
The third requirement, that the funds be distributed in a way that actually benefits the recipients, receives even
less attention. Abdullah (1991, 53) cites the traditional maxim that zakat should be managed so as to transform
the zakat receiver (mustihaq) into a zakat donor (muzakki), but how this is to be achieved, arguably the crux of
the matter, remains under-studied.
It is not only the amount of funding that determines whether the recipients standard of living is raised, but also
how the funds are used. In particular, if zakat receipts are used primarily for short-term consumption, then they
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cannot make a contribution to a sustained improvement in the economic status of the recipient. We will return
to this issue in more detail in the third section, which explores innovation in programming to use zakat proceeds
for income generation. In the remainder of this section, we will explore a somewhat different issue, which is the
broader impact of zakat on the productivity and growth of the economy as a whole.
At its most basic level, zakat takes a portion of the wealth flowing by economic activity and transfers it from
the person who generated it to another person who is in greater need. What is the impact of this activity on
capital accumulation over time? This is an important question because future growth depends on investment
and investment depends on the availability of the surplus to be invested (as well as a long list of other factors, of
course). This issue does not appear to be addressed in the zakat literature, at least not in any systematic way. The
following two subsections first discuss the powerful dynamic of repeated zakat payment over time and provide a
concrete example from an inspiring example of this strategy used to transform a poor village in Egypt.

Z4D program dynamism: the power of compounding

without interest
Table 6 presents a highly simplified example of how payment of zakat on an initial balance of 1000 monetary units
would affect the growth of the balance over time, under two scenarios. Each scenario assumes that the 1000 units
are subject to a zakat of 2.5 percent (are zakatable, in the usual terminology) and fall above the minimum level
that triggers a zakat obligation (the nisab). The calculation assumes that the full investable surplus is subject to
zakat, which would generally be the case for commercial enterprises (other categories may involve a higher or
65 lower rate of zakat). It does not allow for other deductions, such as income tax.
Table 6. Impact of zakat on wealth accumulation

Principal Difference in asset value at Zakat recipient asset buildup if

end of period same rate of return
Year Without With Absolute As share of Cumulative If zakat earns
zakat zakat difference value without zakat re- same return
zakat ceived
Case 1: 5% real rate of return
0 1000 975 25 97.5% 25 25
10 1629 1233 396 75.7% 303 387
20 2653 1559 1094 58.8% 654 1068
30 4322 1972 2350 45.6% 1099 2294
40 7040 2493 4547 35.4% 1661 4437

Multiplication of wealth
7.0 2.6
Zakat paid as share of final value reduction 36.5%
Case 2: 10% real rate of return
0 1000 975 25 97.5% 25 25
10 2594 1963 630 75.7% 390 616
20 6727 3953 2774 58.8% 1126 2709
30 17449 7960 9489 45.6% 2608 9263
40 45259 16029 29231 35.4% 5592 28528

Multiplication of wealth
45.3 16.4
Zakat paid as share of final value reduction 19.1%
Source: authors calculations
The table presents two scenarios, one where the funds are able to earn a real rate of return of 5% and one where
the return is 10%. The scenarios show what would happen to the principle over the long term, with a planning
horizon of 10, 20, 30, and 40 years, replicating an investors career.
This table illustrates a number of points. First, although zakat is a relatively small amount, just 2.5 percent of the

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asset value, over time it has a large effect on the accumulated value of the investment. In the case of the 5 percent
return scenario, zakat reduces the value of the asset from about 7000 without zakat to less than 2500 with zakat,
a reduction of over 4500, while at the higher rate of return, the endpoint is reduced from 45,000 to only 16,000,
with almost 30,000 foregone.
The difference is not distributed as zakat, however. In the first case, less than 1700 of the 4500 foregone is paid in
zakat, while at the higher rate of return, only about 6000 of the 30,000 foregone is distributed. The rest is a dead-
weight loss in the form of foregone return to investment that is diverted to zakat.
In neither case does our hypothetical investor fall into poverty. In the 5 percent case, he increases his capital
almost 2.5 times, even with the zakat deduction, and in the 10 percent case he retires with 16 times the capital
he started with forty years earlier.
This example assumes that there is no return on the zakat itself, that it is simply consumed by the recipients.
At present, this is what happens in nearly all cases. The transfer of capital from a profitable enterprise into
consumption is the source of the deadweight loss.
If instead the zakat were invested to enable an indigent young person to establish a company and produced an
ongoing future income stream for the zakat receiver, then the dead-weight loss would be almost entirely avoided.
The future profit-making potential of the zakatable profit in each period would not vanish into thin air, with only a
small share of it being used to support consumption of the poor recipient, but would instead shift from the wealthy
individual to the zakat recipient.
Table 6 also demonstrates the resulting outcome if we assume that the zakat recipient is able to generate the
same return as the zakat payer, but continues to receive zakat so that he or she can build up a business and a
capital from the businesss profits, while also benefiting from continuing zakat support. Under this scenario, the
initial seed planted by the first zakat contribution of only 25 units grows very rapidly into a flourishing tree, boosted
along by the annual infusions of additional capital.
If this scenario continued for the entire 40-year period used in the example, the very fortunate mustihaq would end
up with a total capital accumulation at the end of the period much larger than the zakat payer! The zakat receiver
accumulates his own nest-egg of 1000 units by year 20 at the 5% return and by year 13 at the 10% return, thus
presumably accomplishing the goal of the system, which is to transform zakat recipients into zakat payers.
Of course, carrying on zakat contributions long after the recipient has ceased to be poor would not make sense to
the zakat payer or to society as a whole. Before this point is reached, the donor would naturally redirect the funds
to support another new enterprise, thus setting it on its way to growth, prosperity, and job creation.
In this manner, one donor would support the launch of several small businesses over his or her career, which in
turn would create jobs and accumulate capital to the point where they, too, began to distribute zakat and support
the growth of still more small businesses. Through this system, both the collection of zakat and its use could make
a much more effective contribution to the realization of social equity and economic advancement.
The example given is strictly illustrative, of course. It assumes that the zakat donor would have the skill and time
to be able to identify a poor person having a viable business opportunity that yields a market return and further
assumes that the enterprise would in fact succeed. It assumes that all zakat is reinvested during the timeframe.
These are quite strong assumptions, but is should also be recognized that, as with any venture capitalist, a few
very successful ventures can make up for several unsuccessful ones and the 5 percent return posited in the low-
return case provides a substantial margin for earnings to be withdrawn for the owners consumption.
In any case, the impact across the economic system as a whole of applying this approach consistently instead of
supporting short-term consumption needs could have a very positive effect over time. Small companies engaged
in low-capital enterprises such as trading can generate good returns and grow quickly, however, so it is not
unrealistic to expect that they can earn a market return, at least in their early years.
A further consideration is that many people who would readily be categorized as poor (that is, lacking sufficient
income to live a dignified life) are already engaged in small enterprises of one form or another. Undoubtedly some
of them could transform these into successful and growing businesses, rather than merely subsistence activities,
with the benefit of an infusion of zakat capital. The latter, it should be stressed differs from a normal investment or
a loan in three key respects. First, there is no risk for the recipient: the funds do not have to be repaid as would
a loan, interest-free or otherwise. Second, the capital itself is permanently transferred to the recipient and the
giver retains no ownership interest in it or control over it. Subsequent support, however, would be dependent
on how well the recipient uses the money, adding an incentive to stay on the straight and narrow. Third, in the
model described, repeating payments are made regularly and predictably, over a period of several years, which
increases their impact exponentially (quite literally).
Sarif and Kamri (2009) point out that use of zakat for consumption may nonetheless provide a good complement to
Islamic microfinance or another loan, reducing the chance that the client will need to divert loan funds into consumption,
thus further increasing indebtedness. A further use of zakat in connection with microfinance is to deal with situations
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where the client is not able to repay the loan due to no fault of his/her own (e.g. illness, theft etc.). Research into
enterprise financing by informal women fruit vendors in Cairo by Kadhim (2011) found that many women avoided
credit because they feared the disastrous effects of indebtedness, including loss of their household goods or even
imprisonment. The availability of zakat allocations for indebtedness, one of the eight zakat purposes, could thus be
a useful adjunct to credit programs for the poor, provided that suitable controls are in place to ensure that inability to
repay is due to factors outside the borrowers control, to avoid creating inappropriate incentives to default.
The alternative of using zakat for development is clearly preferable to incurring the large dead-weight loss that
taxing capital to support short-term consumption would impose on the economy and society at large. Applied to
all of the zakat contributions in a society, this reduction in investment return could have a substantial impact on
growth, at least in principle.
The question then arises, how can zakat best be used to promote local economic development?
The concrete example of Tafahna al-Ashraf, an Egyptian village that has been able to transform itself through
zakat, provides a practical demonstration of the transformative power of Z4D using a systematic reinvestment
strategy that is continued not simply for several years, but, as in the case study presented, for decades.
Although this villages example is noteworthy for its impact, other examples of community-based Z4D can be
found in Egypt. Abou-Kurayshah (1999), for example, gives a full description of an initiative in several villages
in Qena that included local zakat collection to fund school expansion; establishment of Islamic centers; building
or upgrading of mosques, roads and bridges; and collective insurance (takafol) schemes. Benthall (34-35)
describes a similar experience in the West Bank in which a village zakat committee bought buildings - a cow
farm, a sheep farm, a dairy for pasteurization - and also invests in land and real estate to bring in income, as
67 well as establishing a well-equipped clinic and supporting 750 local students.
Tafahna al-Ashraf: A transformative Egyptian Z4D model
The village of Tafahna al-Ashraf, in the Egyptian Delta, used Z4D strategies implemented systematically over three
decades to transform itself from a poverty-stricken village into a flourishing community. Four factors distinguish
this experience from other zakat programs and point the way to a model that would go beyond charity to become
truly transformative:
Local direction and leadership: The Tafahna al-Ashraf experience epitomizes guhood zatiya, a
recurring concept in Islamic writings that is usually but somewhat inadequately translated as self help.
From start to finish, the program was developed and managed largely by a group of village residents for
their mutual benefit.
Broad participation: The leadership engaged the entire community in the program from its earliest days
and this engagement continued as it grew.
Reliance on sustaining income growth through reinvestment: The program began with an income-
generating activity and, at each stage, a large share of income was reinvested to start new projects.
Focus on long-term: The program managers defined five-year-plans that identified the community
assets to be established at each stage and sustained this process for more than two decades.
Although the Tafahna al-Ashraf experience has been documented in the press (see Shahin 1999 for an English
language account), on various websites, and in at least two scholarly studies (Emara 2003 and El Daly 2003) and
although the villages leaders themselves have worked to promote the model, it remains relatively unknown and has
not been widely replicated, at least not in the full form needed to succeed on the same level of Tafahna al-Ashraf.
This model merits much greater attention. The following account draws on the research conducted by Emara and
El Daly, as well as more recent press and online coverage.
In 1982, when the program was conceived, Tafahna al-Ashraf was a small and impoverished Delta village with
a largely illiterate population, many of whom were reliant on seasonal migration to find work and sustain their
families. A group of young men from the village formulated a plan to develop their village performing their military
service. On their return, they began putting their plan into action by launching a chicken project as the first step to
build a self-sustaining local economy through their own efforts. They designated 20% of the income to be Gods
share, which would be reinvested in development.
The leader of the group, Salah Attia, was one of a handful of college-educated youth in a village that was largely
illiterate. On the return of the group from military service in 1984, they convened the entire village and presented
their plans. They insisted that 100% of the villagers agree to the program, and this was accepted. A formal board
was constituted to oversee the project.
One of the first initiatives in addition to the chicken operation was to establish a reconciliation committee to
deal with all manner of disputes, whether involving the project or otherwise. This approach used, solh urfy, is a
traditional Egyptian institution prevalent in rural areas and also, in the authors experience, practiced by Islamic
cooperatives in informal areas. Despite this initiative, the core group of active supporters for the program

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dwindled to a core of two in the face of implementation challenges. The first step, symbolic of the commitment
to collective benefit, was the collective construction of an Azharite (Islamic) center at the entrance to the village
on a small plot of unused land.
Although only one other villager in addition to Attia remained involved in the program, the chicken farm was
launched and proved extremely successful. With success came additional partners and new steps toward self-
sufficiency. Over its first few years, the Greater Partners share allocated for reinvestment from the additional
returns from each expansion was increased from 20% to 100%. A third initiative, the planting of 1000 date trees,
was funded with these revenues, and an Azharite school committee was formed to plan construction of educational
infrastructure with the projects returns. Between 1984 and 1988, the first schools were established, built floor by
floor over the period as resources were available.
In 1988, a formal zakat committee was formed under the oversight of Nasser Social Bank to manage the growing
pool of funds. Individuals not able to provide zakat were encouraged to donate labor to the program. The program
categorized all villagers into those who could, those who could not work, and those who were employed but not
earning enough for a decent standard of living. The hard-working among the able-bodied were given buffaloes to
raise, already pregnant to achieve a rapid return.
The second five-year plan, running to 1993, focused on development of a feed factory to support the growing chicken
operation and to generate more sales from other villages. By 1989, 225 villagers were employed in various projects
within the scheme. In 1991 a branch of Al-Azhars sharia college was established in the village. The profits from the
feed plant were dedicated to support this institution. A wide variety of other small-scale income-generating projects
were also initiated, such as sheep-farming. These projects were generally allocated to individuals eligible for zakat
support, such as widows. By 1992, all of the able-bodied were employed in one project or another. 68
The third five-year plan, ending in 1999, emphasized realizing the income-generation potential of the
Azharite college. Dormitories, shops, and restaurants were developed for the students coming from outside
the village, numbering some 16,000, and the villagers built a train station on the line passing the village to
facilitate student transport. According to Emara, the six-feddan plot dedicated to the college, which would
have generated an annual farming income of approximately LE 90,000 was by 2003 generating a monthly
income for the villagers of LE 300,000.
More recent press reports (see, for example, M. Hassan, 2012, and Sangab, 2010) document the continued
expansion of the programs initiatives and the sustainability of the income increases achieved. The Azharite
college has been substantially expanded to include four schools.
As a result of this highly successful Z4D initiative, it has been reported that no villagers have incomes low enough
to be eligible for zakat. Instead, the continuing zakat generation is devoted to supporting the poor in nearby
villages and needy students studying at the Azharite college, 3000 of whom receive zakat support.
This experience demonstrates the value of Z4D approaches, even without the benefit of outside resource flows
into the low-income community using the approach. Further research is needed to fully document the approach
as well as to understand why the approach has not been adopted more broadly.

Doctrinal issues in Z4D

This section reviews four related issues that have emerged in the management of zakat with special relevance to
the wider application of Z4D strategies: 1) the role of public versus private institutions in collecting and managing
zakat; 2) the eligibility of private zakat institutions the amils or collectors share; 3) the reinterpretation of the
eight categories of recipient to meet modern needs; and 4) use of zakat for infrastructure, construction, and
institutional development as opposed to direct hand to hand distribution.

Should zakat be collected by private or public institutions?

The most important zakat controversies from the standpoint of Z4D relate to the core question of whether
private institutions can implement zakat programs. While there is no theoretical reason why a government-run
zakat program could not engage in Z4D, the history of such organizations strongly suggests that they lack the
business knowledge and flexibility to be successful in such an endeavor. Public zakat institutions also appear to
be regrettably deficient in accountability, transparency, and lack of bias, all of which would be essential to prevent
Z4D programs from turning into sinkholes of corruption.
As the broad outline of Z4D programming above indicates, the use of zakat for inclusive wealth creation requires
an ability to make business decisions to select beneficiaries who can take advantage of equity infusions to build
businesses that cannot only sustain their owners but create jobs for others. Such businesses would also benefit
from advice and access to business opportunities through contact with donors and other businesspeople, a
function that is nearly impossible for a government organization to provide, particularly a national one, because
of the degree of continuing donor control and involvement required.
Despite the clear advantages of private zakat collection institutions over public ones, as demonstrated by the
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Indonesia and Western examples, conservative Muslim scholars continue to argue for government collection.
This view falls within the position that zakat is a sustaining pillar of Islamic finance (Weiss, 2002). Shaikh (2010,
1) even argues that it is maintained that Zakah is the only tax the government in an Islamic economy can levy.
While the greatest degree of controversy in this area surrounds who should manage zakat once collected,
the degree of zakat obligation, if any, falling on corporations is also an area of controversy. On the one hand,
corporations may be legal persons, but they are clearly not Muslims and zakat is an obligation falling on Muslims
only. On the other hand, zakat is intended to serve as a means of transferring a share of wealth from those who
hold it to those who lack it in the interest of social equity, a purpose that potentially benefits corporations as well
as all other members of society.
Firdaus et al (2009, 20) are among those affirming that the obligation to pay zakat also applies to corporations, if
certain conditions hold. The latter include whether the companys ownership is Muslim, whether the annual general
meeting gives its approval, whether the corporations activities are halal, and, of course, whether its assets exceed
the minimum amount (nisab). They argue that the obligation of zakat on corporations is analogous to zakat on trade.
They also cite the practical benefits of corporate zakat collection: in the case of Indonesia, they estimate the total
amount that could potentially be collected from zakat at 3.4 percent of national GDP. The largest share of this
potential, in their estimation, would come from the corporate sector, including private companies, government
companies, and bank assets, rather than from individuals.
The 2011 law on zakat collection in Indonesia, reasserting the role of the state BAZNAS institution in overseeing
private zakat institutions, is further evidence that this controversy has not been resolved, even in a country where
69 interpretations tend to be more flexible than in the Middle East.
Can private zakat institutions use the amils share to cover administrative costs?
It is self-evident that private sector institutions cannot develop and implement enterprise support programs or
social welfare systems if they cannot cover the substantial administrative costs inevitably associated with such
activities. Yet conservative Muslim scholars argue that the amils share applies only to government collectors,
an argument closely related to the first controversy, that the government should collect zakat. The Australian
UMA site (2013), for example, states that the amileen are people appointed by an Islamic Government to collect
Zakat. Conservative Mufti Muhammad Taqi Usmani (2013), interpreting Hanafi fiqh (a branch of Islamic law) goes
further, stating that: is not permissible for such private organizations to spend the zakat money to cover their administration costs.
It is true that the Holy Quran has allowed to give some part of zakat money to Amilin i.e. the persons appointed
by the government to collect zakat. But it is applicable only in the context of an Islamic State which duly manages
collection and distribution of zakat. This principle cannot be extended to the employees of private organizations.
He goes on to state the rationale for this, which is that only a true Islamic state...can ensure that those employees are
not committing any misconduct, thus overlooking the question of whether any such state exists in the modern era.

Box 2. Recent fatwas on both sides of zakat controversies in Egypt

Fatwas opening new areas for zakat
The Fatwa Council ruled in 2006 that it is permissible to allocate zakat to Muslim refugees
Dr. Ali Gomaa ruled in 2005 that it is permissible to allocate zakat for the publishing of
books of knowledge, ruling that it is a form of jihad spreading the call to Islam.
Dr. Ali Gomaa ruled in 2002 that zakat should be used for the construction of the Childrens
Cancer Hospital.
Dr. Ali Gomaa ruled in 2005 that a joint stock company should pay zakat, based on its
annual profit and working capital (but not on its capital investment).
Fatwa 168/622 of 2005 ruled that the Egyptian Food Bank is a legitimate recipient of zakat
Dr. Ali Gomaa ruled in February 2013 that zakat should be used to fund research, arguing
that this would address the slavery of ignorance.

Fatwas confirming traditional views

The Fatwa Council ruled in 2009 that zakat may not be used to construct mosques and

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service complexes. (Note the conflict with Dr. Gomaas ruling on the use of zakat for
hospital construction).
Source: Dar al-Ifta website,

Although it is difficult to find a scholar arguing explicitly that use of the zakat amil portion by private collectors is
permitted, the amil category is shown on the financial reports of transparent zakat-collecting organizations, such
as Dompet Dhuafa in Indonesia. In other cases, it is not clear whether the administrative costs are covered from
zakat or from other sources of income (infaq, sadaqa, etc.) governed by far fewer restrictions.
Can the eight zakat categories be reinterpeted to meet modern needs?
Although there is no disagreement as to the fixedness of the eight permitted categories for use of zakat, there is
considerable movement on how these are interpreted, particularly the category designated Fisabilillah, in the
path of God. The latter can be interpreted as anything from community development to supporting jihad.
Box 2 presents selected examples of recent fatwas issued by authoritative religious authorities in Egypt,
including the Fatwa Council (Dar al-Iftah al-Misriyya) and the Mufti Ali Gomaa. In addition, zakat collectors in
Egypt and elsewhere are experimenting with these uses quite widely. For example, Dhompet Duafa (Indonesia)
includes female sex workers because they are in bondage to the owners of the brothels and may work under
forcible control (Lessy, 2009, 115).
Can zakat be used for institutional development, infrastructure, and construction?
The final controversy relates to whether zakat can be used to develop institutions that serve the authorized
recipient categories, including development of physical facilities and infrastructure that provides an ongoing
service to the members of these groups.
This area is clearly far from resolution, as shown by the fatwas in Box 2. On the one hand, several initiatives
announced in the press or catalogued by scholars describe zakat funding as being used to fund school buildings
in Egypt (Al-Borsa, 25 Aug. 2012), housing in Egypt, Lebanon, and Malaysia (al-Borsa,7 Apr. 2013, Abdul Mohit
and Nazyddah, 2011, al-Fangari, 1982), and, in rural villages, everything from mosques to schools to bridges
(Abou-Kurayshah, 1999). Al-Fangari (1982) and Al-Karanshawy (quoted in El Daly 2003) advocate using zakat to
construct hospitals, factories, homes for orphans and the elderly, hospitals, and other facilities to serve the poor
and needy.
On the other hand, Australias UMA Zakat Fund (2013) states clearly that, Zakat cannot be given for the
construction of Masjid, Madrasah, Hospital, a well, a bridge or any other public amenity. Khan (1995, 69)
expresses a similar view, stating that [z]akah funds shall not be spent on the buildings, roads and other
infrastructure as this violate the rule of tamlik.

Findings and concluding remarks

The foregoing sections demonstrate that there is a widespread, vibrant, and sometimes controversial movement
to liberate zakat from the static and traditional hand-out models that have dominated the practice under state
direction. Private zakat collection and disbursement programs are emerging in countries as diverse as the United
States, Egypt, and Indonesia. These institutions, joined at times by state-led institutions, are experimenting with
new models, termed here Z4D, that use this powerful Islamic financial tool to achieve lasting improvements in the
lives of those in poverty and in society as a whole.
This study has aimed to explore how zakat is evolving and whether a movement is evident to add approaches
oriented toward long-term development engaging the poor as partners rather than a static charity model. The
examples presented above strongly support a conclusion that such an evolution is taking place, confirming the
first hypothesis stated above. The examples given from Egypt, particularly the model of Tafahna al-Ashraf village
but other national and local models as well, show that Egypt is a part of this global movement within the Islamic
world, confirming the second hypothesis. Similar statements could be made about other middle-income countries,
particularly Indonesia and Malaysia. Signs of innovation are evident in the Gulf countries, as well.
At the same time, it is not possible to conclude that this movement has attained anything resembling a critical
mass or that it has as yet had an impact on the fight against poverty in Egypt or any other country within the
Islamic world. There are also signs of resistance to these innovations evident from Australia to Pakistan. Too
little information is available to determine whether the examples given here are worthy but isolated and limited
experiences, or whether they are the leading edge of a broad social movement to achieve social justice and
economic development. The level of documentation available in the Arab world, including Egypt, is also noticeably
much less advanced than the literature available in the West or Southeast Asia, making it difficult to assess the
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status of this evolution beyond some intriguing experiments.

Two things are needed beyond further research to extend our knowledge of what is actually happening in this area.
First, there must be greater recognition that zakat has the potential to be much more than a once-a-year
handout to poor families; it has the potential not only to transform the lives of able-bodied poor people --
of which Egypt has literally tens of millions seeking a better life for themselves -- but also to support new,
community-based models of productive and social enterprise development. More work is needed to document
the isolated experiences, to determine whether others exist that are equally promising but unknown, and to
link these local efforts with the private zakat initiatives emerging at the national level, such as Misr el-Kheir and
La-faqr, and in financial institutions.
Second, there must be a systematic effort to develop and apply these models on a broader basis, with an
emphasis on mobilization of resources over the long term, within the communities themselves as well among
the well-to-do, and with as much transparency and rigorous documentation as many of the other global models.

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