Zakat system’s failure to deliver

Funds increasing but poverty not decreasing.

M Zubair Chodhury July 22, 2012


Zakat is generally considered a religious obligation that aims to eradicate inequality through redistribution of wealth in an Islamic society. It is a faith-backed social tool to eliminate levels of poverty and ensure social equity. The coeval administrative system of this religious tax in Islamic world shows that there are only few countries including Pakistan, Malaysia, Singapore, Indonesia and Brunei where zakat is collected as compulsory obligation by the state. In Pakistan the strategy was adopted by a military government to portray its image as working for rapid Islamisation in the country. Many years after that, it seems the zakat system under the control of government has produced just a weapon to gain political mileage instead of its primary objectives of poverty elimination and bridging the gap between the rich and the poor.

At least 43% of the population is living below the poverty line, according to the economic survey and BISP, much higher than the World Bank estimation of 22.6% in 2006. World Bank classifies those people under the poverty line who earn less than $1.25 or Rs3,243 per month. On the other hand, Rs7.8 billion have been allocated for zakat fund in the first nine months of 2012 and Rs50 billion for Benazir Income Support Programme (BISP) during year 2011-12. So why is the increasing amount of Zakat fund not decreasing the number of people living below the poverty line?

There are many flaws but the front runner is corruption in the distribution system. Political motive for distribution instead of addressing poverty has crippled the mechanism of collecting and distributing.

Another problem is there is not much lucidity about it. It can be called a state tax or just a religious obligation. If it is a state tax lived on income or wealth then there is again a muss of double payment among the people who are paying income tax regularly. There are various Islamic countries where zakat collection is not the subject of state. Individuals pay this religious obligation in their private capacity.

Zakat as a state subject does not only create the problem of collection but distribution is also a major obstacle in a country like Pakistan. The conventional system of zakat distribution has plenty of space for corruption due to mismanagement and political mediations. Non-availability of accurate data of zakat holders and payers is another issue which is also considered a source of corruption.

In view of the economic implications of running a zakat system in Pakistan, the beneficiaries get a slight gain if anything due to the increasing number of people sinking below the poverty line.

The amount of zakat is distributed on the basis of equality without assessment of the person’s need. The government provides billion of rupees each year in the form of zakat which may beyond of its outcomes.

Banks and financial institutions are set to deduct Zakat for the 32nd time on Monday. Account holders having Rs51,086 or more would face a 2.5% cut of from their accounts.

After viewing the above facts, it is indispensable running the zakat system under state control. There should be an effective apparatus of need-based assessment and removal of corruption from collection and distribution.

The writer hosts business talk shows on FM 101 and Radio Pakistan and is pursuing an M Phil degree in Economics.

Correction: An earlier version of the story incorrectly stated "Rs3,243 per day" instead of "Rs3,243 per month". The correction has been made.

Published in The Express Tribune, July 23rd, 2012.